hulic reit, inc....result, our portfolio at the end of the 10th fiscal period (as of february 28,...

The following is a summary English language translation of the original Asset Management Report available in Japanese on our website. No assurance or warranties are given with respect to the accuracy or completeness of this summary English language translation. The Japanese original shall prevail in the case of any discrepancies between this summary English language translation and the Japanese original.

Hulic Reit, Inc. Asset Management Report Fiscal period ended February 28, 2019 (September 1, 2018 to February 28, 2019) I. To Our Unitholders First of all, I would like to convey my sincere appreciation to you, our unitholders, for your continued support of Hulic Reit, Inc.

Hulic Reit, Inc. was listed on the Real Estate Investment Trust Securities Market (J-REIT Market) of the Tokyo Stock Exchange in February 2014, and we have steadily built a track record since then. We have now successfully completed our 10th fiscal period (fiscal period ended February 28, 2019). This is entirely due to the strong support of our unitholders, and for this I would like to express my heartfelt gratitude.

I am pleased to report here an overview of our asset management and our operating results for the 10th fiscal period (fiscal period ended February 28, 2019).

During the 10th fiscal period (fiscal period ended February 28, 2019), we procured approximately ¥21.1 billion through our fifth public offering, etc., since our listing, and acquired 6 office properties in total, including Hulic Kamiyacho Building (additional acquisition) and Shinagawa Season Terrace, along with loans. In addition, in September 2018, we completed the third transfer of Leaf Minatomirai (Land). As a result, our portfolio at the end of the 10th fiscal period (as of February 28, 2019) increased to 50 properties (22 office properties, 12 retail properties, 6 private nursing homes, 8 network centers and 2 hotel properties) at ¥306.9 billion, and we achieved the asset size of ¥300.0 billion that we had been pursuing since our listing.

With respect to the properties held, we strived to maintain a high occupancy rates and upwardly revise rental fees through utilizing our sponsor’s property operation and leasing capabilities amid strong real estate leasing market. As a result, for our 10th fiscal period, we recorded operating revenues of ¥8.9 billion, operating profit of ¥5.0 billion, profit of ¥4.4 billion, and distributions per unit came to ¥3,516.

Moreover, Hulic Reit Management Co., Ltd., which is entrusted with the management of the assets of Hulic Reit, Inc., made partial changes to its Operational Guidelines in April 2019 with a view to further increasing unitholder value in the future. Specifically, for Tokyo Commercial Properties it has expanded the target investment area for office properties from Tokyo’s 23 wards to Tokyo and government-ordinance-designated cities in the surrounding areas, and for Next-Generation Assets Plus it has added office properties and retail properties that do not fall under the category of Tokyo Commercial Properties to the previous investment target of private nursing homes, network centers, and hotels.

We will continue to work to maximize unitholder value by maintaining and growing profits over the medium to long term and increasing the size and value of our portfolio through the support of the Hulic Group.

We ask for the continued support of our unitholders.

Hulic Reit, Inc.

Eiji Tokita, Executive Officer

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(Reference)

Composition of Unitholders

(As of February 28, 2019)

Category Individuals Financial institutions

Securities firms

Other corporations

Foreign individuals Total

Number of Unitholders by Type (persons) 7,609 139 16 208 202 8,174

Percentage (Note) (%) 93.1 1.7 0.2 2.5 2.5 100.0 Number of Investment Units by Unitholder Type (units) 56,452 725,797 37,353 161,596 269,802 1,251,000

Percentage (Note) (%) 4.5 58.0 3.0 12.9 21.6 100.0

(Note) Percentages shown are rounded to one decimal place.

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II. Asset Investment Report 1. Summary of asset management

(1) Changes in investment performance, etc. of the Investment Corporation

Fiscal period Unit

6th fiscal period (From September 1,

2016 to February 28,

2017)

7th fiscal period (From March 1,

2017 to August 31, 2017)

8th fiscal period (From September

1, 2017 to February 28,

2018)


2018 to August 31, 2018)



2019)

Operating revenues Millions of yen 6,685 7,098 8,183 8,101 8,944

[Of the above, real estate lease business revenues] Millions

of yen [6,685] [7,098] [7,460] [7,712] [8,750]

Operating expenses Millions of yen 2,789 3,077 3,449 3,525 3,948

[Of the above, expenses related to real estate lease business]

Millions of yen [2,024] [2,243] [2,390] [2,519] [2,924]

Operating profit Millions of yen 3,896 4,021 4,733 4,576 4,995

Ordinary profit Millions of yen 3,453 3,530 4,215 4,044 4,399

Profit Millions of yen 3,452 3,529 4,214 4,043 4,398

Total assets Millions of yen 244,942 264,657 275,428 283,817 322,661

[Change from the previous fiscal period] % [+15.0] [+8.0] [+4.1] [+3.0] [+13.7]

Net assets Millions of yen 135,504 135,581 145,932 145,761 167,202

[Change from the previous fiscal period] % [+12.4] [+0.1] [+7.6] [(0.1)] [+14.7]

Unitholders’ capital Millions of yen 132,051 132,051 141,717 141,717 162,803

Total number of investment units issued Units 1,045,000 1,045,000 1,110,000 1,110,000 1,251,000

Net assets per unit Yen 129,669 129,743 131,470 131,316 133,655

Total distributions Millions of yen 3,452 3,530 4,214 4,043 4,398

Payout ratio (Note 2) % 100.0 100.0 99.9 99.9 99.9 Basic earnings per unit (Note 3) Yen 3,355 3,377 3,873 3,643 3,654 Distributions per unit Yen 3,304 3,378 3,797 3,643 3,516 [Of the above, distributions of earnings per unit]

Yen [3,304] [3,378] [3,797] [3,643] [3,516]

[Of the above, distributions in excess of earnings per unit]

Yen [–] [–] [–] [–] [–]

Equity ratio [Change from the previous fiscal period]

(Note 4) % 55.3 [(1.3)]

51.2 [(4.1)]

53.0 [+1.8]

51.4 [(1.6)]

51.8 [+0.4]

Return on equity [Annualized] (Note 5) % 2.7

[5.4] 2.6

[5.2] 3.0

[6.0] 2.8

[5.5] 2.8

[5.7] [Other reference information]

Number of properties Properties 37 43 44 46 50 Total leasable area m2 229,069.42 245,476.40 249,606.03 265,569.79 288,230.96 Occupancy rate at end of period % 99.7 99.3 99.7 99.8 100.0

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(Note 1) The amount does not include consumption tax and local consumption tax. (Note 2) The payout ratio is calculated with the following formula and rounded down to one decimal place.

Payout ratio = total distributions / profit × 100 (Note 3) Basic earnings per unit is calculated by dividing profit by the average number of investment units for the period.

Average number of investment units is 1,028,908 units for the 6th fiscal period, 1,045,000 units for the 7th fiscal period, 1,088,099 units for the 8th fiscal period, 1,110,000 units for the 9th fiscal period and 1,203,546 units for the 10th fiscal period.

(Note 4) Equity ratio is calculated with the following formula: Equity ratio = net assets at end of period / total assets at end of period × 100

(Note 5) Return on equity is calculated with the following formula: Return on equity (profit to net assets ratio) = profit / [(net assets at beginning of period + net assets at end of period) / 2] × 100 The value in brackets of return on equity is the value calculated with number of business days (6th fiscal period: 181 days; 7th fiscal period: 184 days; 8th fiscal period: 181 days; 9th fiscal period: 184 days; 10th fiscal period: 181 days) converted into annual values.

(2) Transition of the Investment Corporation for the fiscal period under review

The Investment Corporation was established on November 7, 2013, with Hulic Reit Management Co., Ltd. (hereinafter referred to as the “Asset Manager”), which is entrusted with the management of the assets of the Investment Corporation, as the organizer under the Act on Investment Trusts and Investment Corporations of Japan (hereinafter referred to as the “Investment Trust Act”). On November 25, 2013, the Investment Corporation was registered with the Director-General of the Kanto Local Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 88). The Investment Corporation issued new investment units through a public offering with the payment date on February 6, 2014, which were listed on the Real Estate Investment Trust Securities (J-REIT) Market of Tokyo Stock Exchange, Inc. (Securities code: 3295) on February 7, 2014. New investment units were issued through a third-party allotment on March 7, 2014. The Investment Corporation recently carried out capital increases through its fifth public offering after its listing on October 31, 2018 and a third-party allotment on November 19, 2018. As a result, the number of investment units issued at the end of the reporting period was 1,251,000.

The Investment Corporation primarily invests in and manages office buildings and retail facilities.

i) Investment environment and investment performance Investment environment: During the reporting period, the Japanese economy exhibited a moderate trend of recovery despite weakness being observed in some areas of exports and production. In the rental office market, the vacancy rate continued at a low level mainly because of companies’ increase in space and relocation for more space in line with expansion of their business, while rent levels continued to moderately rise due to the resulting demand.

Investment performance: During the reporting period, the Investment Corporation acquired six properties, Shinagawa Season Terrace in September 2018, KSS Gotanda Building and Hulic Kamiyacho Building (additional acquisition) in October 2018, Hulic Nihonbashi Honcho 1 Chome Building and Bancho House in November 2018, and Ebisu Minami Building in December 2018 (total acquisition price: ¥37,200 million), and transferred the remaining quasi co-ownership interest of Leaf Minatomirai (Land) in September 2018. As a result, the number of properties held by the Investment Corporation at the end of the reporting period was 50, and the total acquisition price was ¥306,929 million (rounded to the nearest ¥1 million). The occupancy rate of the entire portfolio has remained at a high level to end the reporting period at 100.0% (rounded to the nearest tenth).

Based on the belief that consideration for the environment, society and governance leads to the maximization of medium- to long-term unitholder value, the Asset Manager formulated the “Sustainability Policy” in March 2016 and has implemented initiatives related to environmental consideration, improvement in tenants’ satisfaction and contribution to local communities.

The Investment Corporation has participated in the Real Estate Assessment of Global Real Estate Sustainability Benchmark (GRESB) (Note 1) from the fiscal period ended February 28, 2017. In the GRESB Real Estate Assessment conducted in 2018, the Investment Corporation was awarded a “Green Star” for the second consecutive year for its initiatives in environmental awareness and sustainability, having received strong recognition in both the areas of “Management & Policy” and “Implementation &

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Measurement.” At the same time, the Investment Corporation also received “4 Stars,” the 2nd-highest GRESB Rating for the second year in a row. In addition, the Investment Corporation has been working on acquisition of external certification relating to energy conservation and environmental performance of its owned properties, and as of April 12, 2019, it has acquired external certification for a total of 12 properties, as follows. Concerning DBJ Green Building Certification (Note 2), the Investment Corporation has acquired certification for 6 properties, with Ochanomizu Sola City and Shinagawa Season Terrace obtaining the highest ranking. As for BELS rating (Note 3), which is a public rating system that assesses the energy-conservation performance of non-residential buildings, the Investment Corporation acquired certification for 4 properties, with HULIC &New SHIBUYA obtaining the highest ranking. Finally, concerning the building evaluation certification CASBEE (Note 4), Hulic Kamiyacho Building and Gate City Ohsaki received the highest rating. (Note 1) The “Global Real Estate Sustainability Benchmark (GRESB)” is an annual benchmark assessment used to

evaluate ESG considerations in the global real estate sector. It was established in 2009 primarily by major European pension fund groups, which led the Principles for Responsible Investment.

(Note 2) The “DBJ Green Building Certification” is a certification system created by Development Bank of Japan Inc. in April 2011 to support real estate properties with environmental and social awareness (“Green Building”). The certification system is said to evaluate and certify real estate properties in terms of their desirability for society and the economy based on a comprehensive evaluation, which includes not only environmental performance, but also responsiveness to various stakeholder needs such as consideration for emergency preparedness and the community, and to support these efforts.

(Note 3) The “BELS rating” is a building energy-efficiency labeling system that was started with the aim of having third-party institutions implement accurate evaluation and labeling of energy-conservation performance in non-residential buildings in accordance with the guidelines set forth in October 2013 by the Ministry of Land, Infrastructure, Transport and Tourism in “Evaluation Guidelines for Energy-efficiency Labeling for Non-residential Buildings (2013).”

(Note 4) “CASBEE” (Comprehensive Assessment System for Built Environment Efficiency) is a method for evaluating and rating the environmental performance of buildings. CASBEE is a system that comprehensively evaluates the quality of buildings by giving consideration not only to the environment in regard to the use of materials that have good energy conservation and small environmental loads, but also to the comfort inside the buildings and to the landscapes.

ii) Status of financing During the reporting period, the Investment Corporation procured ¥30,470 million in total on September 10, 2018, October 1, 2018, October 16, 2018, and December 27, 2018 as short-term loans payable to fund the acquisition of assets, etc. Also, the Investment Corporation used part of ¥20,068 million procured by a capital increase through public offering carried out on October 31, 2018 to fund the acquisition of assets, etc., and using the left-over balance, together with ¥1,016 million procured by a capital increase through third-party allotment carried out on November 19, 2018 and cash reserves, the Investment Corporation repaid ¥14,360 million as a partial early repayment of short-term loans payable. Furthermore, On February 7, 2019, the Investment Corporation repaid ¥16,660 million as a full early repayment of short-term loans payable that was procured to fund the acquisition of assets, etc. and repaid ¥8,550 million in long-term loans payable that was due for repayment by refinancing ¥25,210 million as long-term loans payable.

As a result, at the end of the reporting period, interest-bearing debt totaled ¥139,510 million (comprising ¥3,960 million in short-term loans payable, ¥10,320 million in current portion of long-term loans payable, ¥113,230 million in long-term loans payable, ¥2,000 million in current portion of investment corporation bonds and ¥10,000 million in investment corporation bonds), resulting in a loan-to-value (LTV) ratio of 43.2%.

Issuer credit ratings of the Investment Corporation as of the end of the reporting period are as follows:

Credit rating agency Contents of credit rating Japan Credit Rating Agency, Ltd. Long-term issuer rating: AA-, Rating outlook: Stable

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iii) Overview of financial results and distributions As a result of the above asset management, operating revenues for the reporting period were ¥8,944 million (up 10.4% compared with the previous fiscal period), operating profit was ¥4,995 million (up 9.2% compared with the previous fiscal period), ordinary profit after deducting interest expenses for borrowings, etc. was ¥4,399 million (up 8.8% compared with the previous fiscal period), and profit was ¥4,398 million (up 8.8% compared with the previous fiscal period).

Furthermore, in accordance with the distribution policy set forth in the Investment Corporation’s Articles of Incorporation, the Investment Corporation has decided to pay distributions for the reporting period in an amount roughly equal to unappropriated retained earnings, with the aim of including distributions of profits in tax deductible expenses pursuant to special measures for the taxation system for investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation). Consequently, distributions per unit came to ¥3,516.

(3) Status of capital increase, etc. Capital increase, etc. from the establishment of the Investment Corporation to the end of the reporting period are as follows.

Date Event

Total number of investment units issued (Units)

Total unitholders’ capital (Millions of yen) Remarks

Change Balance Change Balance

November 7, 2013 Incorporation through private placement 2,000 2,000 200 200 (Note 1)

February 6, 2014 Capital increase through public offering 617,500 619,500 64,355 64,555 (Note 2)

March 7, 2014 Capital increase through third-party allotment 32,500 652,000 3,387 67,943 (Note 3)

November 6, 2014 Capital increase through public offering 122,860 774,860 17,785 85,728 (Note 4)

November 21, 2014 Capital increase through third-party allotment 6,140 781,000 888 86,617 (Note 5)

March 29, 2016 Capital increase through public offering 167,600 948,600 29,444 116,061 (Note 6)

April 13, 2016 Capital increase through third-party allotment 8,400 957,000 1,475 117,537 (Note 7)

October 3, 2016 Capital increase through public offering 83,800 1,040,800 13,821 131,358 (Note 8)

October 26, 2016 Capital increase through third-party allotment 4,200 1,045,000 692 132,051 (Note 9)


November 20, 2017 Capital increase through third-party allotment 3,200 1,110,000 475 141,717 (Note 11)


November 19, 2018 Capital increase through third-party allotment 6,800 1,251,000 1,016 162,803 (Note 13)

(Note 1) At the incorporation of the Investment Corporation, investment units were issued with an issue value per unit of ¥100,000.

(Note 2) New investment units were issued through public offering with an issue price per unit of ¥108,000 (issue value: ¥104,220) in order to raise funds for the acquisition of new properties, etc.

(Note 3) New investment units were issued through a private placement allocated to Mizuho Securities Co., Ltd. with an issue value per unit of ¥104,220.


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<Changes in market price of investment unit>

The highest and lowest unit prices (closing price) of the investment securities of the Investment Corporation by fiscal period on the J-REIT Market of the Tokyo Stock Exchange are as follows:

Highest and lowest unit prices

by fiscal period (Closing price)

Fiscal period 6th fiscal period

ended February 28, 2017

7th fiscal period ended

August 31, 2017


February 28, 2018


August 31, 2018


February 28, 2019 Highest (Yen) 196,100 186,000 173,000 172,900 180,800 Lowest (Yen) 172,800 165,300 155,900 156,500 158,500

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(4) Distributions, etc. Distributions for the fiscal period under review (the 10th fiscal period) are ¥3,516 per unit. The Investment Corporation, with the aim of applying special measures for the taxation system for investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation) to deduct an amount equivalent to distributions of earnings from the taxable income of the Investment Corporation as a tax deductible expense, will pay distributions for the fiscal period under review in an amount roughly equal to unappropriated retained earnings.

Fiscal period



2017)


2017 to August 31,

2017)



2018)


2018 to August 31,

2018)



2019)

Total unappropriated retained earnings

¥3,452,871 thousand





Accumulated earnings ¥191 thousand ¥58 thousand ¥324 thousand ¥347 thousand ¥688 thousand Total amount of cash distributions






(Distributions per unit) (¥3,304) (¥3,378) (¥3,797) (¥3,643) (¥3,516) Of the above, total amount of distributions of earnings






(Distributions of earnings per unit) (¥3,304) (¥3,378) (¥3,797) (¥3,643) (¥3,516)

Of the above, total amount of refunds of unitholders’ capital – – – – –

(Refunds of unitholders’ capital per unit) (–) (–) (–) (–) (–)

Of the total amount of refunds of unitholders’ capital, total amount of distributions from allowance for temporary difference adjustment

– – – – –

(Of the refunds of unitholders’ capital per unit, distributions from allowance for temporary difference adjustment per unit)

(–) (–) (–) (–) (–)

Of the total amount of refunds of unitholders’ capital, the total amount of distributions from distribution on reduction of unitholders’ capital for taxation purposes

– – – – –

(Of the refunds of unitholders’ capital per unit, distributions from distributions on reduction of unitholders’ capital for taxation purposes)

(–) (–) (–) (–) (–)

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(5) Future investment policies and issues to address In terms of the outlook for the rental office market, demands for increased floor space in corporate offices are expected to continue to be steady. In the real estate selling market, the transaction prices for property are projected to continue at high levels amid the continuing favorable fund procurement conditions, etc.

Against this backdrop, the Investment Corporation will focus on Tokyo Commercial Properties (Note 1), aiming to maximize unitholder value over the medium to long term, and invest in Next-Generation Assets Plus (Note 2), aiming to support stable earnings over the long term. As part of these efforts to maximize investor value over the medium to long term, the Investment Corporation will implement efforts combining the Asset Manager’s own measures to drive external and internal growth while using the support of the Hulic Group. The Investment Corporation will maintain and grow profits over the medium to long term and increase the size and value of the asset portfolio.

In terms of financing strategy, the Investment Corporation will seek to maintain the LTV ratio at an appropriate level and shift to longer loan-terms with fixed interest rates and staggered repayment dates in order to maintain a stable and healthy financial position.

(Note 1) “Tokyo Commercial Properties” are office properties and retail properties under a concept specific to the Investment Corporation that comprehensively includes properties consistent with the basic philosophy of the Investment Corporation. Specifically, office properties are those in Tokyo and government-ordinance-designated cities in the surrounding areas that are in principle located within a five-minute walking distance from the nearest train station, in areas where the office properties are sufficiently competitive. Retail properties are those located in Tokyo and major cities in the surrounding areas that are in principle located within a five-minute walking distance from the nearest train station or in areas with a high concentration of retail activities. Such retail properties are also highly visible in public and have the potential to generate demand from prospective tenants that offer products and services suitable for the characteristics of their respective retail areas.

(Note 2) “Next-Generation Assets Plus” are properties specified for investment by the Investment Corporation based on its basic philosophy. Specifically, they are lease properties for which the Investment Corporation deems that firm demand can be anticipated even in the future and stable long-term earnings can be obtained, or that it will contribute to the maximization of unitholder value over the medium to long term, and in principle, the Investment Corporation stringently selects investment targets after carefully examining the individual properties’ profitability, characteristics of the location and competitiveness of the location. The Investment Corporation classifies private nursing homes, network centers and hotels, as well as office properties and retail properties that do not fall under the category of Tokyo Commercial Properties, as Next-Generation Assets Plus.

(6) Significant events after the reporting period Not applicable.

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2. Overview of the Investment Corporation (1) Status of unitholders’ capital

6th fiscal period As of February

28, 2017

7th fiscal period As of August 31,

2017


28, 2018

9th fiscal period As of August 31,

2018


28, 2019 Total number of authorized investment units 20,000,000 units 20,000,000 units 20,000,000 units 20,000,000 units 20,000,000 units

Total number of investment units issued 1,045,000 units 1,045,000 units 1,110,000 units 1,110,000 units 1,251,000 units

Unitholders’ capital ¥132,051 million ¥132,051 million ¥141,717 million ¥141,717 million ¥162,803 million Number of unitholders 7,280 7,238 8,460 7,893 8,174

(2) Matters regarding investment units The top 10 unitholders based on the percentage of investment units owned to total investment units issued as of the end of the fiscal period under review are as follows:

Name Number of investment units owned (Units)

Percentage of investment units owned to total

investment units issued (%)

Japan Trustee Services Bank, Ltd. (Trust account) 277,495 22.18 The Master Trust Bank of Japan, Ltd. (Trust account) 181,861 14.53 Hulic Co., Ltd. 140,720 11.24 Trust & Custody Services Bank, Ltd. (Securities investment trust account) 45,218 3.61 The Nomura Trust and Banking Co., Ltd. (Investment accounts) 42,313 3.38 NOMURA BANK (LUXEMBOURG) S.A. 40,151 3.20 Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. 20,823 1.66 STATE STREET BANK WEST CLIENT - TREATY 505234 15,110 1.20 BNYM AS AGT/CLTS 10 PERCENT 13,133 1.04 The Chukyo Bank, Limited 11,895 0.95

Total 788,719 63.04

(Note) Percentage of investment units owned to total investment units issued is rounded down to two decimal places. The same applies hereinafter.

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(3) Matters relating to officers, etc. i) Executive Officers, Supervisory Officers and Independent Auditor for the fiscal

period under review are as follows:

Title and post Name Major concurrent post, etc.

Total amount of compensation for each

position during the fiscal period under review

Executive Officer Eiji Tokita President and CEO of Hulic Reit Management Co., Ltd. ¥– thousand

Supervisory Officer

(Note 1)

Kunio Shimada Representative Partner of Shimada, Hamba and Osajima (law firm) ¥3,000 thousand

Shigeru Sugimoto Representative of Sakura Horwath Audit Corporation ¥3,000 thousand Independent

Auditor Ernst & Young ShinNihon LLC – ¥14,500 thousand

(Note 2)

(Note 1) Although the Supervisory Officers may be officers in corporations other than the ones indicated above, there is no conflict of interest between the Investment Corporation and such corporations, including those indicated above.

(Note 2) Compensation to the Independent Auditor includes compensation for auditing English financial statements and compensation for work to prepare comfort letters regarding issuance of new investment units.

ii) Policy regarding the dismissal or non-reappointment of the Independent Auditor Dismissal or non-reappointment of the Independent Auditor shall be examined at the Investment Corporation’s Board of Directors, pursuant to the provisions of the Investment Trust Act in the case of dismissal, or in light of a comprehensive consideration of quality of auditing, amount of compensation for auditing and various other circumstances in the case of non-reappointment.

(4) Asset Manager, Asset Custodian and Administrative Agents The names of the Asset Manager, Asset Custodian, and Administrative Agents at the end of the fiscal period under review are as follows:

Consignment classification Name Asset Manager Hulic Reit Management Co., Ltd. Asset Custodian Mizuho Trust & Banking Co., Ltd. Administrative Agents (administration of the unitholders’ registry, etc.) Mizuho Trust & Banking Co., Ltd. Administrative Agents (accounting work, etc.) Mizuho Trust & Banking Co., Ltd. Administrative Agents (administration related to institutional management) Mizuho Trust & Banking Co., Ltd. Administrative Agents (administration of investment corporation bonds) Mizuho Bank, Ltd.

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3. Status of portfolio of the Investment Corporation (1) Composition of the assets of the Investment Corporation

Type of assets Category Region

(Note 1)

9th fiscal period (As of August 31, 2018)

10th fiscal period (As of February 28, 2019)

Total amount held (Millions of yen)

(Note 2)

Percentage to total assets (%)

(Note 3)

Total amount held (Millions of yen)

(Note 2)

Percentage to total assets (%)

(Note 3)

Real estate

Tokyo Commercial Properties

Six central wards of Tokyo

¥ – – ¥ 3,591 1.1

Other wards of Tokyo – – – – Other – – – – Total ¥ – – ¥ 3,591 1.1

Next- Generation

Assets

Six central wards of Tokyo

¥ – – ¥ – –

Other wards of Tokyo – – – – Other – – – – Total ¥ – – ¥ – –

Total real estate ¥ – – ¥ 3,591 1.1

Real estate

in trust

Tokyo Commercial Properties

Six central wards of Tokyo ¥ 193,093 68.0 ¥ 226,489 70.2

Other wards of Tokyo 16,991 6.0 17,002 5.3 Other 6,484 2.3 4,692 1.5

Total ¥ 216,568 76.3 ¥ 248,184 76.9

Next- Generation

Assets

Six central wards of Tokyo ¥ 19,583 6.9 ¥ 19,517 6.0

Other wards of Tokyo 20,045 7.1 19,963 6.2 Other 14,944 5.3 14,849 4.6

Total ¥ 54,573 19.2 ¥ 54,331 16.8 Total real estate in trust ¥ 271,142 95.5 ¥ 302,515 93.8

Total real estate and real estate in trust ¥ 271,142 95.5 ¥ 306,106 94.9 Deposits and other assets ¥ 12,675 4.5 ¥ 16,554 5.1

Total assets ¥ 283,817 100.0 ¥ 322,661 100.0 (Note 1) Six central wards of Tokyo refer to Chiyoda ward (Chiyoda-ku), Chuo ward (Chuo-ku), Minato ward (Minato-ku),

Shinjuku ward (Shinjuku-ku), Shibuya ward (Shibuya-ku) and Shinagawa ward (Shinagawa-ku). (Note 2) Total amount held represents the balance sheet carrying amount (for real estate and real estate in trust, book value

less depreciation expenses), rounded down to the nearest million yen. (Note 3) Percentage to total assets represents the ratio of each asset held to total assets, rounded to one decimal place.

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(2) Major assets held An overview of the major assets held by the Investment Corporation as of the end of the fiscal period under review (top 10 properties by book value at the end of the fiscal period) is as follows:

Property name Book value

(Thousands of yen)

Leasable area (m2)

(Note 1)

Leased area (m2)

(Note 2)

Occupancy rate (%)

(Note 3)

Percentage to total real estate lease

business revenues (%)

(Note 4)

Primary asset class

Hulic Kamiyacho Building ¥ 55,495,054 32,487.06 32,487.06 100.0 14.9 Office property Ochanomizu Sola City (Note 5) 37,138,944 13,923.42 13,923.42 100.0 (Note 6) Office property

Hulic Toranomon Building 18,085,436 8,574.65 8,574.65 100.0 5.4 Office property Sotetsu Fresa Inn Ginza 7 Chome 11,511,250 6,984.32 6,984.32 100.0 2.7 Hotel

Hulic Kudan Building (Land) 11,191,213 3,351.07 3,351.07 100.0 3.0 Office property Hulic Ginza 7 Chome Building (Note 5) 11,090,419 6,002.99 6,002.99 100.0 3.1 Office property

Oimachi Redevelopment Building (#2) 9,530,207 14,485.66 14,485.66 100.0 3.6 Retail property

Toranomon First Garden (Note 5) 8,278,344 5,689.97 5,689.97 100.0 3.5 Office property

Hulic Shimura-sakaue 7,630,187 11,528.34 11,528.34 100.0 3.0 Retail property Chiba Network Center 6,980,076 23,338.00 23,338.00 100.0 2.5 Network center

Total ¥ 176,931,135 126,365.48 126,365.48 100.0 –

(Note 1) Leasable area is equivalent to gross leasable space, based on the lease agreements or floor plans of buildings of each asset held. With respect to properties of which ownership is only for land, leasable area is the leasable area of the land as described in the applicable land lease agreements or land plans.

(Note 2) Leased area is equivalent to total floor area of leased space set out in the relevant lease agreements of each asset held. For the portion for which there is a Pass-through Master Lease Agreement, under which rents are directly received from end-tenants in principle, the actual total area leased under each sublease agreement entered into with end-tenants corresponding to that portion is provided; and for the portion for which there is a Fixed-type Master Lease Agreement, under which a certain amount of rent is received regardless of fluctuations in rents for end-tenants, the total area corresponding to that portion is provided. For the property of which ownership is only for land, the area of the land is provided.

(Note 3) Occupancy rate is calculated with the following formula, rounded to one decimal place: leased area ÷ leasable area × 100

(Note 4) Percentage to total real estate lease business revenues shows the percentage obtained by dividing the real estate lease business revenues of each property by the aggregate amount for all properties.

(Note 5) The leasable area, leased area and occupancy rate of Ochanomizu Sola City show figures equivalent to the quasi co-ownership interest of property held by the Investment Corporation (21.7%). For Hulic Ginza 7 Chome Building, leasable area, leased area and occupancy rate show figures equivalent to the quasi co-ownership interest of property held by the Investment Corporation (50.0%). For Toranomon First Garden, leasable area shows figures equivalent to the Investment Corporation’s partial ownership in the building (including some of co-ownership portion). (For the co-ownership portion, the figures calculated on a pro-rata basis in accordance with the co-ownership interests owned by the Investment Corporation are listed.) On the other hand, a master lease is served on the whole building together with the exclusively owned portions owned by other unit owners, and as income and expenditure of the property is allocated according to the ratio of ownership interest of the partial ownership owned by each unit owner, the figure shown for occupancy rate is that of the entire building. Leased area shows amounts equivalent to the ratio of ownership interest of the partial ownership in the building held by the Investment Corporation (approximately 81.4%).

(Note 6) The Investment Corporation has not obtained permission from the end-tenant or other relevant party of these properties to disclose the relevant information.

13

(3) Details of assets incorporated into the portfolio, such as real estate An overview of real estate and beneficiary rights of real estate in trust invested in by the Investment Corporation as of the end of the fiscal period under review is as follows:

Category Property name Location (Note 1) Asset type

Book value at end of period

(Millions of yen)

Assessed value at end

of period (Millions of

yen) (Note 2)

Toky

o Co

mm

erci

al P

rope

rties

Offi

ce p

rope

rties

Hulic Kamiyacho Building 4-3-13 Toranomon, Minato-ku, Tokyo

Beneficiary right of real estate in trust ¥ 55,495 ¥ 62,600

Hulic Kudan Building (Land)

1-13-5 Kudankita, Chiyoda-ku, Tokyo

Beneficiary right of real estate in trust 11,191 13,200

Toranomon First Garden 1-7-12 Toranomon, Minato-ku, Tokyo


Rapiros Roppongi 6-1-24 Roppongi, Minato-ku, Tokyo


Hulic Takadanobaba Building

3-19-10 Takada, Toshima-ku, Tokyo


Hulic Kanda Building 1-16-5 Kandasudacho, Chiyoda-ku, Tokyo


Hulic Kandabashi Building 1-21-1 Kandanishikicho, Chiyoda-ku, Tokyo


Hulic Kakigaracho Building

1-28-5 Nihonbashikakigaracho, Chuo-ku, Tokyo


Ochanomizu Sola City 4-6-1 Kanda Surugadai, Chiyoda-ku, Tokyo


Hulic Higashi Ueno 1 Chome Building

1-7-15 Higashi Ueno, Taito-ku, Tokyo


Tokyo Nishi Ikebukuro Building

1-7-7 Nishi Ikebukuro, Toshima-ku, Tokyo


Gate City Ohsaki 1-11-1 Ohsaki, Shinagawa-ku, Tokyo


Hulic Toranomon Building 1-1-18 Toranomon, Minato-ku, Tokyo


Hulic Shibuya 1 chome Building 1-3-9 Shibuya, Shibuya-ku, Tokyo Beneficiary right of

real estate in trust 5,113 5,670

Hulic Higashi Nihonbashi Building

1-1-5 Higashinihonbashi, Chuo-ku, Tokyo


Hulic Jimbocho Building 2-2-31 Kanda Jimbocho, Chiyoda-ku, Tokyo


Hulic Ginza 7 Chome Building

7-3-5 Ginza, Chuo-ku, Tokyo Beneficiary right of real estate in trust 11,090 11,650

Shinagawa Season Terrace 1-2-70 Kounan, Minato-ku, Tokyo Beneficiary right of real estate in trust 6,089 6,200

KSS Gotanda Building 1-21-8 Nishigotanda, Shinagawa-ku, Tokyo Real estate 3,591 3,500

Hulic Nihonbashi Honcho 1 Chome Building

1-9-4 Nihonbashihoncho, Chuo-ku, Tokyo


Bancho House 29-1 Ichibancho, Chiyoda-ku, Tokyo


Ebisu Minami Building 2-12-18 Ebisuminami, Shibuya-ku, Tokyo


Reta

il pr

oper

ties Oimachi Redevelopment

Building (#2) 5-20-1 Higashi-Oi, Shinagawa-ku, Tokyo


Oimachi Redevelopment Building (#1)

5-18-1 Higashi-Oi, Shinagawa-ku, Tokyo


14

Category Property name Location (Note 1) Asset type

Book value at end of period

(Millions of yen)

Assessed value at end

of period (Millions of

yen) (Note 2)

Toky

o Co

mm

erci

al P

rope

rties

Reta

il pr

oper

ties

Dining Square Akihabara Building

1-16-2 Kandasakumacho, Chiyoda-ku, Tokyo


Hulic Jingu-Mae Building 5-17-9 Jingumae, Shibuya-ku, Tokyo


Hulic Shinjuku 3 Chome Building

3-17-2 Shinjuku, Shinjuku-ku, Tokyo


Yokohama Yamashitacho Building

36-1, Yamashitacho, Naka-ku, Yokohama-shi, Kanagawa


Orchid Square 1-2-11 Yurakucho, Chiyoda-ku, Tokyo


Hulic Todoroki Building 3-5-2 Todoroki, Setagaya-ku, Tokyo


Hulic Omori Building 6-28-12 Minamioi, Shinagawa-ku, Tokyo


HULIC &New SHIBUYA 31-1 Udagawa-cho, Shibuya-ku, Tokyo


HULIC &New SHINBASHI

2-11-10 Shinbashi, Minato-ku, Tokyo


Hulic Shimura-sakaue 3-20-1 Maeno-cho, Itabashi-ku, Tokyo, etc.


Nex

t-Gen

erat

ion

Ass

ets

Priv

ate

nurs

ing

hom

es

Aria Matsubara 5-34-6 Matsubara, Setagaya-ku, Tokyo


Trust Garden Yoganomori 1-3-1 Yoga, Setagaya-ku, Tokyo Beneficiary right of real estate in trust 5,335 6,880

Trust Garden Sakurashinmachi

2-11-1 Tsurumaki, Setagaya-ku, Tokyo


Trust Garden Suginami Miyamae

2-11-10 Miyamae, Suginami-ku, Tokyo


Trust Garden Tokiwamatsu 4-4-10 Higashi, Shibuya-ku, Tokyo Beneficiary right of real estate in trust 3,035 3,300

SOMPO Care La vie Re Kita-Kamakura

2713-2 Aza Takano, Ofuna, Kamakura-shi, Kanagawa


Net

wor

k ce

nter

s

Ikebukuro Network Center 4-30-17 Kami-Ikebukuro, Toshima-ku, Tokyo


Tabata Network Center 6-2-8 Tabata, Kita-ku, Tokyo Beneficiary right of real estate in trust 1,359 1,550

Hiroshima Network Center 2-6-6 Hikari-machi, Higashi-ku, Hiroshima-shi, Hiroshima


Atsuta Network Center 20-1 Hatano-cho, Atsuta-ku, Nagoya-shi, Aichi

Beneficiary right of real estate in trust 986 1,070

Nagano Network Center 1600-12, Oaza Tsuruga Aza Naemahira, Nagano-shi, Nagano

Beneficiary right of real estate in trust 303 362

Chiba Network Center 1-1-1 Muzaigakuendai, Inzai-shi, Chiba


Sapporo Network Center 2-4-1, Kita 9 Jonishi, Kita-ku, Sapporo-shi, Hokkaido


Keihanna Network Center 113-1, Kumomura Kizu, Kizugawa-shi, Kyoto


Hot

els Sotetsu Fresa Inn Ginza 7

Chome 7-11-12 Ginza, Chuo-ku, Tokyo Beneficiary right of real estate in trust 11,511 12,100

Sotetsu Fresa Inn Tokyo-Roppongi

3-10-1 Roppongi, Minato-ku, Tokyo


Total ¥306,106 ¥355,242

15

(Note 1) “Location” shows the property’s street address in principle. However, in cases where the property does not yet have a street address, the building’s location as registered in the property registry has been provided (in cases of multiple buildings, only one location has been provided).

(Note 2) The figures for assessed value at end of period show the appraisal price stated on the real estate appraisal report created by the real estate appraisers of Daiwa Real Estate Appraisal Co., Ltd., Japan Real Estate Institute, CBRE K.K. and The Tanizawa Sōgō Appraisal Co., Ltd. based on the methods and standards for asset appraisal set forth in the Investment Corporation’s Articles of Incorporation and the rules set forth by The Investment Trusts Association, Japan.

The trends of the lease business by real estate and beneficiary rights of real estate in trust invested in by the Investment Corporation are as follows:

Category Property name

9th fiscal period (From March 1, 2018 to August 31, 2018)

10th fiscal period (From September 1, 2018

to February 28, 2019)

Number of tenants at end of period

(Tenants) (Note 1)

Occupancy rate at end of period

(%) (Note 2)

Real estate lease business

revenues during the

period (Thousands of

yen) (Note 3) (Note 4)


business revenues

(%) (Note 4)


(Tenants) (Note 1)


(%) (Note 2)


revenues during the




business revenues

(%) (Note 4)

Toky

o Co

mm

erci

al P

rope

rties

Offi

ce p

rope

rties

Hulic Kamiyacho Building 1 97.8 ¥ 975,880 12.7 1 100.0 ¥1,306,910 14.9 Hulic Kudan Building (Land) 1 100.0 265,002 3.4 1 100.0 265,002 3.0

Toranomon First Garden 1 100.0 298,954 3.9 1 100.0 305,773 3.5 Rapiros Roppongi 1 100.0 287,057 3.7 1 100.0 317,644 3.6 Hulic Takadanobaba Building 1 100.0 173,077 2.2 1 100.0 172,520 2.0

Hulic Kanda Building 1 100.0 135,104 1.8 1 100.0 136,512 1.6 Hulic Kandabashi Building 1 100.0 84,856 1.1 1 100.0 87,494 1.0 Hulic Kakigaracho Building 1 100.0 105,291 1.4 1 100.0 106,226 1.2 Ochanomizu Sola City 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4) Hulic Higashi Ueno 1 Chome Building 1 100.0 100,331 1.3 1 100.0 100,906 1.2

Tokyo Nishi Ikebukuro Building 1 100.0 56,750 0.7 1 100.0 56,750 0.6

Gate City Ohsaki 2 100.0 162,834 2.1 2 100.0 165,232 1.9 Hulic Toranomon Building 1 100.0 470,910 6.1 1 100.0 472,511 5.4 Hulic Shibuya 1 chome Building 1 100.0 113,203 1.5 1 100.0 131,680 1.5

Hulic Higashi Nihonbashi Building 1 100.0 107,996 1.4 1 100.0 108,016 1.2

Hulic Jimbocho Building 1 100.0 43,868 0.6 1 100.0 44,121 0.5 Hulic Ginza 7 Chome Building 1 100.0 230,090 3.0 1 100.0 274,013 3.1

Shinagawa Season Terrace – – – – 1 99.9 (Note 4) (Note 4) KSS Gotanda Building – – – – 1 100.0 95,606 1.1 Hulic Nihonbashi Honcho 1 Chome Building – – – – 1 100.0 67,929 0.8

Bancho House – – – – 1 100.0 (Note 4) (Note 4) Ebisu Minami Building – – – – 1 100.0 (Note 4) (Note 4)

Reta

il pr

oper

ties

Oimachi Redevelopment Building (#2) 1 100.0 312,000 4.0 1 100.0 312,000 3.6

Oimachi Redevelopment Building (#1) 1 100.0 218,931 2.8 1 100.0 218,931 2.5

Dining Square Akihabara Building 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4)

Hulic Jingu-Mae Building 1 100.0 84,980 1.1 1 100.0 86,148 1.0

16

Category Property name

9th fiscal period (From March 1, 2018 to August 31, 2018)




(Tenants) (Note 1)


(%) (Note 2)


revenues during the




business revenues

(%) (Note 4)


(Tenants) (Note 1)


(%) (Note 2)


revenues during the




business revenues

(%) (Note 4)

Toky

o Co

mm

erci

al P

rope

rties

Reta

il pr

oper

ties

Hulic Shinjuku 3 Chome Building 1 100.0 175,811 2.3 1 100.0 176,725 2.0

Yokohama Yamashitacho Building 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4)

Leaf Minatomirai (Land) 1 100.0 64,970 0.8 – – 5,785 0.1 Orchid Square 1 100.0 93,296 1.2 1 100.0 93,615 1.1 Hulic Todoroki Building 1 100.0 60,584 0.8 1 100.0 54,650 0.6 Hulic Omori Building 1 100.0 109,015 1.4 1 100.0 109,294 1.2 HULIC &New SHIBUYA 1 100.0 71,377 0.9 1 100.0 74,117 0.8 HULIC &New SHINBASHI 1 100.0 84,626 1.1 1 100.0 84,718 1.0 Hulic Shimura-sakaue 1 100.0 84,944 1.1 1 100.0 258,166 3.0

Nex

t-Gen

erat

ion

Ass

ets Pr

ivat

e nu

rsin

g ho

mes

Aria Matsubara 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4) Trust Garden Yoganomori 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4) Trust Garden Sakurashinmachi 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4)

Trust Garden Suginami Miyamae 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4)

Trust Garden Tokiwamatsu 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4) SOMPO Care La vie Re Kita-Kamakura 1 100.0 (Note 4) (Note 4) 1 100.0 (Note 4) (Note 4)

Net

wor

k ce

nter

s

Ikebukuro Network Center 1 100.0 130,176 1.7 1 100.0 130,176 1.5 Tabata Network Center 1 100.0 43,285 0.6 1 100.0 43,285 0.5 Hiroshima Network Center 1 100.0 42,091 0.5 1 100.0 42,091 0.5 Atsuta Network Center 1 100.0 35,273 0.5 1 100.0 35,273 0.4 Nagano Network Center 1 100.0 16,708 0.2 1 100.0 16,708 0.2 Chiba Network Center 1 100.0 214,687 2.8 1 100.0 214,687 2.5 Sapporo Network Center 1 100.0 80,358 1.0 1 100.0 80,358 0.9 Keihanna Network Center 1 100.0 45,166 0.6 1 100.0 45,166 0.5

Hot

els Sotetsu Fresa Inn Ginza 7

Chome 1 100.0 255,636 3.3 1 100.0 240,000 2.7

Sotetsu Fresa Inn Tokyo-Roppongi 1 100.0 108,000 1.4 1 100.0 108,000 1.2

Total 47 99.8 ¥7,712,533 100.0 51 100.0 ¥8,750,103 100.0

(Note 1) Number of tenants is stated as 1 when a master lease agreement has been concluded with a master lease company. Moreover, the number of tenants is stated as 1 for Hulic Kudan Building (Land) and in the 9th fiscal period for Leaf Minatomirai (Land). The number of tenants for Gate City Ohsaki is stated as 2 because master lease agreements were concluded with the respective master lease companies of the business/commercial tower and the residential tower, respectively. For Shinagawa Season Terrace, the number of tenants is stated as 1, because NTT Urban Development Corporation receives rent from each end-tenant for the entire building.

(Note 2) Occupancy rate is calculated with the following formula, rounded to one decimal place: leased area ÷ leasable area × 100 (Note 3) Real estate lease business revenues during the period shows the sum total of the real estate lease business revenues

during the period for each real estate, etc. (Note 4) Real estate lease business revenues during the period and percentage to total real estate lease business revenues are not

disclosed because the Investment Corporation has not obtained permission from the end-tenant or other relevant party of these properties to disclose the relevant information.

17

(4) Status of outstanding contracted amount and fair value of specified transactions The status of the contracted amount and fair value of specified transactions outstanding for the Investment Corporation as of February 28, 2019 is as follows:

Category Type

Contracted amount (Millions of yen)

Fair value (Millions of yen)

(Note 1) Portion due after 1 year

(Note 1) (Note 2)

Off-market- transaction

Interest rate swap transaction ¥ 72,057 ¥ 61,737 ¥ – Payment: fixed interest rate

Receipt: floating interest rate Total ¥ 72,057 ¥ 61,737 ¥ –

(Note 1) Contracted amount for interest rate swap transaction is shown based on the assumed principal. (Note 2) Of these transactions, the statement of the fair value has been omitted for those transactions that satisfy requirements of

special treatment based on accounting standards for financial instruments.

(5) Status of other assets Beneficiary rights of real estate in trust, etc. owned by the Investment Corporation are stated together in “(3) Details of assets incorporated into the portfolio, such as real estate” above.

There are no major specified assets incorporated into the portfolio that are a major investment target by the Investment Corporation other than those listed in the aforementioned “(3),” as of the end of the fiscal period under review.

(6) Status of asset holding by country and region Not applicable for countries and regions other than Japan.

18

4. Capital expenditures for properties held (1) Schedule of capital expenditures

For each asset held by the Investment Corporation as of February 28, 2019, the main capital expenditures for renovation work, etc. scheduled as of the end of the 10th fiscal period are as below. Estimated capital expenditure for work mentioned below includes parts that are charged to expenses.

Property name Location Purpose Scheduled period

Estimated capital expenditure for work

(Millions of yen)

Total amount

Payment during the

period

Total amount

paid Hulic Higashi Ueno 1 Chome Building

Taito-ku, Tokyo

Renovation work for elevator

From October 2019 to November 2019 ¥ 40 ¥ – ¥ –

Hulic Jimbocho Building

Chiyoda-ku, Tokyo

Renovation work for mechanical parking lot

From October 2019 to November 2019 28 – –

Hulic Todoroki Building

Setagaya-ku, Tokyo

Work to replace energy meters

From January 2020 to February 2020 24 – –

Chiba Network Center

Inzai-shi, Chiba

Work to renew receiver sensors

From September 2019 to February 2020 80 – –

(2) Capital expenditures during the period An overview of the construction work corresponding to capital expenditures during the reporting period is as below. Capital expenditures during the reporting period were ¥176,516 thousand and repair expenses were ¥115,929 thousand. In aggregate, construction work in the amount of ¥292,446 thousand was carried out during the period.

Property name Location Purpose Period Capital expenditure

for work (Millions of yen)

Hulic Higashi Ueno 1 Chome Building

Taito-ku, Tokyo

Renewal work for air-conditioning facility

From September 2018 to January 2019 ¥ 88

Hulic Jimbocho Building

Chiyoda-ku, Tokyo

Renovation work for external wall

From November 2018 to February 2019 30

Hulic Todoroki Building

Setagaya-ku, Tokyo

Work A for B2 floor to attract tenants

From August 2018 to November 2018 12

Other 45

Total ¥ 176

(3) Money accumulated for long-term repair plan Not applicable.

19

5. Status of expenses and liabilities (1) Details of expenses relating to asset management, etc.

Item 9th fiscal period

(From March 1, 2018 to August 31, 2018)


to February 28, 2019) (a) Asset management fee ¥812,586 thousand ¥836,463 thousand (b) Asset custody fee ¥13,260 thousand ¥13,470 thousand (c) Administrative service fees ¥42,467 thousand ¥42,715 thousand (d) Directors’ compensations ¥6,000 thousand ¥6,000 thousand (e) Other operating expenses ¥131,359 thousand ¥125,202 thousand

Total ¥1,005,674 thousand ¥1,023,851 thousand

(Note) Other than the amount stated above, asset management fee includes the portion of compensations associated with a property acquisition factored into the book value of the individual properties (the 9th fiscal period: ¥46,427 thousand; the 10th fiscal period: ¥111,575 thousand) and the portion of compensations associated with a property transfer deducted from gain on sales of real estate properties of the individual properties (the 9th fiscal period: ¥9,825 thousand; the 10th fiscal period: ¥4,912 thousand).

(2) Status of borrowings Status of borrowings of the Investment Corporation as of the end of the fiscal period under review is as follows:

Category Lender Loan

execution date

Balance at beginning of

period (Millions of

yen)

Balance at end of period (Millions of

yen)

Average interest

rate (Note 1) (Note 2)

Repayment date

Repayment method Use Remarks

Shor

t-ter

m lo

ans p

ayab

le

Mizuho Bank, Ltd. (Note 4) June 29,

2018

¥ 275 ¥ –

0.3135% June 28, 2019

Lump-sum repayment (Note 3)

Unsecured and

unguaranteed

Sumitomo Mitsui Banking Corporation (Note 4) 192 –

MUFG Bank, Ltd. (Note 4) 82 – Mizuho Bank, Ltd.

August 8, 2018

1,980 1,980

0.2626% August 8, 2019

Sumitomo Mitsui Banking Corporation 1,386 1,386

MUFG Bank, Ltd. 594 594 Mizuho Bank, Ltd. (Note 5)

September 10, 2018

– –

0.3136% September 9, 2019

Sumitomo Mitsui Banking Corporation (Note 5) – –

MUFG Bank, Ltd. (Note 5) – – Sumitomo Mitsui Trust Bank, Limited (Note 6)

October 1, 2018 – – 0.3135% October 1,

2019

Mizuho Bank, Ltd. (Note 7) October 16, 2018 – – 0.3136% August 30,

2019

Mizuho Bank, Ltd. (Note 8) December 27, 2018 – – 0.3127% August 30,

2019 Subtotal ¥ 4,510 ¥ 3,960

Long

-term

loan

s pay

able

Mizuho Bank, Ltd.

February 7, 2014

¥ 2,570 ¥ –

0.7738% February 7, 2019


Unsecured and

unguaranteed

Sumitomo Mitsui Banking Corporation 1,950 –

MUFG Bank, Ltd. 1,100 – Mizuho Trust & Banking Co., Ltd. 1,050 –

The Norinchukin Bank 1,660 – Resona Bank, Limited 220 – Mizuho Bank, Ltd.

February 27, 2015

1,000 1,000

0.4350% August 30, 2019

Sumitomo Mitsui Banking Corporation 960 960

MUFG Bank, Ltd. 550 550 Mizuho Trust & Banking Co., Ltd. 300 300

20


execution date


period (Millions of

yen)


yen)

Average interest


Repayment date


Long

-term

loan

s pay

able

Sumitomo Mitsui Trust Bank, Limited

February 27, 2015

500 500

0.4350% August 30, 2019


Unsecured and

unguaranteed

The Norinchukin Bank 500 500 Resona Bank, Limited 170 170 Shinkin Central Bank 200 200 Aozora Bank, Ltd. 200 200 Shinsei Bank, Limited 200 200 Mizuho Bank, Ltd.

February 27, 2015

1,650 1,650

0.4845% February 28, 2020



The Norinchukin Bank 1,400 1,400 Resona Bank, Limited 140 140 Shinkin Central Bank 300 300 Sumitomo Mitsui Banking Corporation

March 9, 2015 2,000 2,000 0.4810% August 31,

2020 Mizuho Bank, Ltd.

February 29, 2016

1,000 1,000 0.1700% August 31,

2020 MUFG Bank, Ltd. 150 150 The Norinchukin Bank 409 409 Mizuho Bank, Ltd.

February 7, 2014

2,560 2,560

1.1713% February 7, 2021


MUFG Bank, Ltd. 1,060 1,060 Mizuho Trust & Banking Co., Ltd. 1,050 1,050

Sumitomo Mitsui Trust Bank, Limited 1,660 1,660

Resona Bank, Limited 270 270 Mizuho Bank, Ltd.

February 27, 2015

2,800 2,800

0.6750% August 31, 2021



Aozora Bank, Ltd. 300 300 Shinsei Bank, Limited 300 300 Mizuho Bank, Ltd.

February 27, 2015

2,385 2,385

0.7730% February 28, 2022


MUFG Bank, Ltd. 1,055 1,055 Mizuho Trust & Banking Co., Ltd. 800 800

Sumitomo Mitsui Trust Bank, Limited 1,400 1,400

Resona Bank, Limited 200 200 Mizuho Bank, Ltd.

August 31, 2017

150 150

0.4173% February 28, 2022



Sumitomo Mitsui Trust Bank, Limited 128 128

The Norinchukin Bank 500 500 Development Bank of Japan Inc.

February 7, 2014 2,450 2,450 1.6100% August 7,

2022

21


execution date


period (Millions of

yen)


yen)

Average interest


Repayment date


Long

-term

loan

s pay

able

Mizuho Bank, Ltd. August 31, 2015

1,144 1,144 0.7488% August 31,

2022


Unsecured and

unguaranteed

MUFG Bank, Ltd. 710 710 Mizuho Trust & Banking Co., Ltd.

August 31, 2015

549 549

0.7488% August 31, 2022


The Norinchukin Bank 414 414 Resona Bank, Limited 125 125 Development Bank of Japan Inc.

August 31, 2015 414 414 0.7550% August 31,


February 7, 2017

650 650

0.5538% August 31, 2022




The Norinchukin Bank 445 445 Resona Bank, Limited 150 150 Mizuho Bank, Ltd.

February 29, 2016

1,350 1,350

0.4099% February 28, 2023




The Norinchukin Bank 400 400 Resona Bank, Limited 243 243 Shinkin Central Bank 141 141 Aozora Bank, Ltd. 141 141 Mizuho Bank, Ltd.

February 7, 2017

1,500 1,500

0.6031% February 28, 2023




The Norinchukin Bank 245 245 Resona Bank, Limited 150 150 Sompo Japan Nipponkoa Insurance Inc. February 7,

2019

– 500 0.4100% February 28,

2023 Mitsui Sumitomo Insurance Company, Limited – 500

Mizuho Bank, Ltd.

February 29, 2016

1,377 1,377

0.4620% August 31, 2023




Shinsei Bank, Limited 141 141 Mizuho Bank, Ltd.

February 7, 2017

1,863 1,863

0.6564% August 31, 2023


MUFG Bank, Ltd. 600 600

22


execution date


period (Millions of

yen)


yen)

Average interest


Repayment date


Long

-term

loan

s pay

able

Mizuho Trust & Banking Co., Ltd. February 7,

2017

917 917 0.6564% August 31,

2023


Unsecured and

unguaranteed


The Norinchukin Bank February 7, 2017

500 500 0.6564% August 31,

2023 Resona Bank, Limited 302 302 Mizuho Bank, Ltd.

February 7, 2014

400 400

1.8188% February 7, 2024


MUFG Bank, Ltd. 300 300 Development Bank of Japan Inc. February 29,

2016

809 809 0.5188% February 29,

2024 Nippon Life Insurance Company 500 500

Mizuho Bank, Ltd.

February 7, 2017

1,000 1,000

0.6485% February 29, 2024


MUFG Bank, Ltd. 1,719 1,719 Mizuho Trust & Banking Co., Ltd. 600 600


The Norinchukin Bank 569 569 Nippon Life Insurance Company

February 7, 2019 – 500 0.4600% February 29,

2024 Development Bank of Japan Inc.

February 27, 2015 1,900 1,900 1.1738% August 30,

2024 Meiji Yasuda Life Insurance Company

February 29, 2016 500 500 0.5932% August 30,

2024

Mizuho Bank, Ltd. February 7, 2017 1,754 1,754 0.7800% August 30,


August 31, 2017

1,400 1,400

0.5913% August 30, 2024




The Norinchukin Bank 520 520 Resona Bank, Limited 215 215 Shinkin Central Bank 140 140 Shinsei Bank, Limited 140 140 Mizuho Bank, Ltd.

February 27, 2015

250 250

1.4600% February 28, 2025


MUFG Bank, Ltd. 125 125 Mizuho Bank, Ltd.

February 29, 2016

250 250

0.7275% February 28, 2025


MUFG Bank, Ltd. 125 125 Development Bank of Japan Inc.

February 7, 2017 969 969 0.8500% February 28,


August 31, 2017

1,725 1,725

0.6574% February 28, 2025



Development Bank of Japan Inc. 1,010 1,010

23


execution date


period (Millions of

yen)


yen)

Average interest


Repayment date


Long

-term

loan

s pay

able

Sumitomo Mitsui Trust Bank, Limited August 31,

2017

682 682 0.6574% February 28,

2025


Unsecured and

unguaranteed

The Norinchukin Bank 400 400 Resona Bank, Limited 215 215 Shinkin Central Bank August 31,

2017 140 140

0.6574% February 28, 2025 Shinsei Bank, Limited 140 140

Mizuho Bank, Ltd.

February 7, 2019

– 200

0.4133% February 28, 2025

Mizuho Trust & Banking Co., Ltd. – 200

Sumitomo Mitsui Trust Bank, Limited – 200

The Norinchukin Bank – 450 Resona Bank, Limited – 140 Shinsei Bank, Limited – 150 Mizuho Bank, Ltd.

August 31, 2017

1,531 1,531

0.7246% August 29, 2025



Development Bank of Japan Inc. 410 410

Aozora Bank, Ltd. 280 280 Meiji Yasuda Life Insurance Company 230 230

Nippon Life Insurance Company 230 230

Mizuho Bank, Ltd. February 7,

2019

– 500

0.5700% August 29, 2025

Development Bank of Japan Inc. – 1,200

Aozora Bank, Ltd. – 600 Mizuho Bank, Ltd.

February 7, 2019

– 2,910

0.4800% February 27, 2026

Sumitomo Mitsui Banking Corporation – 1,700

MUFG Bank, Ltd. – 850 Mizuho Trust & Banking Co., Ltd. – 1,100


The Norinchukin Bank – 1,410 Resona Bank, Limited – 880 Shinsei Bank, Limited – 450 Mizuho Bank, Ltd.

February 7, 2019

– 3,420

0.5840% August 31, 2026

Sumitomo Mitsui Banking Corporation – 2,700

MUFG Bank, Ltd. – 1,600 Mizuho Trust & Banking Co., Ltd. – 1,050


The Norinchukin Bank – 1,000 Mizuho Bank, Ltd.

February 27, 2015

150 150

1.7500% February 26, 2027


MUFG Bank, Ltd. 75 75 Subtotal ¥ 106,890 ¥ 123,550

Total ¥ 111,400 ¥ 127,510

(Note 1) Average interest rate shows the weighted average rate during the period or for the lender, and the amount has been rounded to four decimal places. Moreover, for borrowings hedged using interest rate swaps to avoid interest rate fluctuation risks, an interest rate that considers the effect of the interest rate swap is shown.

24

(Note 2) Long-term loans payable are borrowings that carry fixed interest. (Includes borrowings that have had the interest fixed by using interest rate swaps.)

(Note 3) The borrowings were funds to purchase beneficiary rights of real estate in trust, etc. (including ancillary expenses) and repay borrowings. (Note 4) The Investment Corporation made early repayment of the amount on February 7, 2019. (Note 5) The Investment Corporation made borrowings in the amount of ¥6,100 million on September 10, 2018, and it made early repayment of the

amount on February 7, 2019. (Note 6) The Investment Corporation made borrowings in the amount of ¥3,450 million on October 1, 2018, and it made early repayment of the amount

on February 7, 2019. (Note 7) The Investment Corporation made borrowings in the amount of ¥18,500 million on October 16, 2018, and it made early partial repayment on

November 7, 2018, and December 7, 2018 and early repayment of the remaining amount on February 7, 2019. (Note 8) The Investment Corporation made borrowings in the amount of ¥2,420 million on December 27, 2018, and it made early repayment of the

amount on February 7, 2019.

(3) Investment corporation bonds

Issuance of investment corporation bonds of the Investment Corporation as of the end of the fiscal period under review is as follows:

Bond name Issuance date


period (Millions of

yen)

Balance at end of period

(Millions of yen)

Interest rate (%)

Repayment date


First Series Unsecured Investment Corporation Bond

August 31, 2015 ¥ 2,000 ¥ 2,000 0.950 August 29,

2025 Lump-sum repayment (Note 1) Unsecured

(Note 2)

Second Series Unsecured Investment Corporation Bond

December 13, 2016 2,000 2,000 0.040 December 13,


(Note 2)

Third Series Unsecured Investment Corporation Bond



(Note 2)

Fourth Series Unsecured Investment Corporation Bond

August 30, 2018 7,000 7,000 0.770 August 30,


(Note 2)

Total ¥ 12,000 ¥ 12,000

(Note 1) Specific use of the proceeds is to be allocated to repayment of borrowings. (Note 2) Corporation bond with pari passu conditions among specified investment corporations.

(4) Short-term investment corporation bonds Not applicable.

(5) Investment unit options

Not applicable.

25

6. Status of trading during the period (1) Status of trading, etc., of real estate, etc., asset-backed securities, etc., infrastructure

assets, etc., and infrastructure-related assets

Type of assets Property name

Acquisition Transfer

Acquisition date

Acquisition value

(Millions of yen)

(Note 1)

Transfer date

Transfer value

(Millions of yen)

(Note 1)

Book value

(Millions of yen)

(Note 2)

Gain (loss) on transfer

(Millions of yen)

(Note 3) Beneficiary right of real estate in

trust Shinagawa Season Terrace September

10, 2018 ¥ 6,100 – ¥ – ¥ – ¥ –

Real estate KSS Gotanda Building October 1, 2018 3,450 – – – –

Beneficiary right of real estate in

trust

Hulic Kamiyacho Building (Additional acquisition)

October 16, 2018 18,500 – – – –


trust


November 1, 2018 3,980 – – – –


trust Bancho House November

1, 2018 2,750 – – – –


trust Ebisu Minami Building December

27, 2018 2,420 – – – –


trust

Leaf Minatomirai (Land) (Note 4) – – September

27, 2018 1,965 1,764 194

Total – ¥ 37,200 – ¥ 1,965 ¥ 1,764 ¥ 194

(Note 1) Acquisition value or transfer value shows the amount that does not include expenses incurred on the acquisition or transfer of the said real estate, etc., which is equivalent to the trading value stated on the sales agreements, and is rounded to the nearest million yen.

(Note 2) Book value shows the amount at the time of the sale. (Note 3) Gain (loss) on transfer represents the transfer value of the property less book value and any transfer-related expenses. (Note 4) Transfer value, book value and gain (loss) on transfer for this property represent the amounts equivalent to 15.0% of

the quasi co-ownership interest related to the transfer.

(2) Status of trading, etc. of other assets The main other assets outside the above-mentioned real estate, etc., asset-backed securities, etc., infrastructure assets, etc., and infrastructure-related assets, are mostly bank deposits and bank deposits within assets in trust.

26

(3) Investigation of the prices, etc. of specified assets i) Real estate, etc.

Acquisition / Transfer

Type of assets Property name Transaction

date

Acquisition value / transfer value

(Millions of yen) (Note 1)

Appraisal value (Millions of

yen) (Note 2)

Appraisal agency Valuation date

Acquisition

Beneficiary right of real

estate in trust

Shinagawa Season Terrace

September 10, 2018 ¥ 6,100 ¥ 6,150 Japan Real Estate

Institute August 1,

2018

Acquisition Real estate KSS Gotanda Building October 1, 2018 3,450 3,490

Daiwa Real Estate Appraisal Co.,

Ltd.

August 31, 2018

Acquisition


estate in trust

Hulic Kamiyacho Building (Additional acquisition)

October 16, 2018 18,500 18,700


Ltd.

August 31, 2018

Acquisition


estate in trust


November 1, 2018 3,980 4,120


Ltd.

August 31, 2018

Acquisition


estate in trust

Bancho House November 1, 2018 2,750 2,800


Ltd.

August 31, 2018

Acquisition


estate in trust

Ebisu Minami Building

December 27, 2018 2,420 2,480

The Tanizawa Sōgō Appraisal

Co., Ltd.

December 1, 2018

Transfer


estate in trust

Leaf Minatomirai (Land)

September 27, 2018 1,965 1,965

(Note 3)


Ltd.

August 31, 2017

Total ¥ 39,165 ¥ 39,705 – –

(Note 1) “Acquisition value / transfer value” shows the amount that does not include expenses incurred on the acquisition or transfer of the said real estate, etc., which is equivalent to the trading value stated on the sales agreements, and is rounded to the nearest million yen.

(Note 2) The real estate appraisal is conducted by applying Real Property Appraisal Standards Practical Theory Chapter 3: Appraisal of the Prices of Securitized Properties.

(Note 3) The value shows an amount calculated by multiplying the appraisal value of the overall property by the quasi co-ownership interest (15.0%) of the subject of transfer.

ii) Other

Not applicable.

(4) Status of transactions with interested person, etc. i) Status of transactions

Category Transaction amount (Note)

Purchase price Sale price Total ¥37,200 million ¥1,965 million

Breakdown of transactions with interested person, etc. Hulic Co., Ltd. ¥29,770 million (80.0%) ¥1,965 million (100.0%)

Total ¥29,770 million (80.0%) ¥1,965 million (100.0%) (Note) Transaction amount is rounded to the nearest million yen.

27

ii) Amount of service fees, etc. paid

Category

Total amount of service fees paid

(A) (Thousands of yen)

Transactions with interested person, etc. Percentage to total amount

B/A (%)

Payee Payment amount (B) (Thousands of yen)

Property management fees ¥ 516,294

Hulic Building Management Co., Ltd. ¥ 118,051 22.9 Tokyo Fudosan Kanri Co., Ltd. ¥ 112,827 21.9

Other expenses related to rent business ¥ 413,201

Hulic Building Management Co., Ltd. ¥ 9,056 2.2 Tokyo Fudosan Kanri Co., Ltd. ¥ 1,725 0.4

(Note 1) Interested person, etc. are the interested person, etc. of the asset management company that have concluded an asset management agreement with the Investment Corporation as prescribed under Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japan and Article 26, Item 27 of the Regulations for Asset Investment Reports by Investment Trusts and Investment Corporations of the Investment Trusts Association, Japan.

(Note 2) Other than the above-mentioned service fees, etc. paid, payment amounts concerning repairs, etc. ordered to interested person, etc. during the fiscal period under review are as follows: Hulic Build Co., Ltd. ¥39,365 thousand Tokyo Fudosan Kanri Co., Ltd. ¥7,080 thousand Hulic Building Management Co., Ltd. ¥2,029 thousand

(5) Transactions with Asset Manager pertaining to its business other than asset management

There are no applicable transactions because the Asset Manager of the Investment Corporation (Hulic Reit Management Co., Ltd.) does not engage in any other businesses, such as Type I Financial Instruments Business, Type II Financial Instruments Business, Real Estate Brokerage Business, or Real Estate Specified Joint Enterprise.

28

7. Financial information (1) Assets, liabilities, principal, and profit and loss

Please refer to “Balance Sheet,” “Statement of Income and Retained Earnings,” “Statement of Changes in Net Assets,” “Notes to Financial Statements” below.

(2) Changes in the calculation method of depreciation expenses Not applicable.

(3) Changes in the evaluation method of real estate, etc., and infrastructure assets, etc. Not applicable.

(4) Beneficiary certificates of investment trusts, etc. set up by the Corporation

Not applicable.

(5) Disclosure regarding corporation holding overseas real estate

Not applicable.

(6) Disclosure regarding real estate owned by corporation holding overseas real estate Not applicable.

29

8. Other (1) Announcements

i) General Meeting of Unitholders Not applicable.

ii) Meeting of Board of Directors of the Investment Corporation

The outline of conclusions or amendments to major agreements, etc. approved at meetings of the Board of Directors of the Investment Corporation during the fiscal period under review is as follows:

Date of Board of Directors meeting Approved items Outline

October 12, 2018 Conclusion of new investment units underwriting agreements

With the issuance of new investment units and sale of investment units approved at the meeting of the Board of Directors held on the same day, the general administrative duties concerning the offering of new investment units were entrusted to Mizuho Securities Co., Ltd., Nomura Securities Co., Ltd., Daiwa Securities Co., Ltd., SMBC Nikko Securities Inc., etc.

December 6, 2018

Comprehensive resolution on issuance of investment corporation bonds and associated consignment of general administrative duties

The Board of Directors made a comprehensive resolution relating to the issuance of investment corporation bonds with a total issue amount to be within ¥23,000 million and an issuance period from January 1, 2019 to June 29, 2019. The Board of Directors approved candidate companies for consignment of administrative duties relating to offering the investment corporation bonds as well as administrative duties relating to receiving requests relating to exercise of rights of investment corporation bonds and other applications from investment corporation bondholders, and operations during the term of the investment corporation bonds (including duties of the fiscal agent, issuing agent and paying agent). The Board of Directors delegated selection of the consignee for general administrative duties relating to the investment corporation bonds and decision making on the scope and the specific consignment conditions of consignment of general administrative duties, and all the necessary matters related to the consignment of administrative operations to the executive officer.

(2) Others

Unless otherwise stated, monetary amounts have been rounded down and percentage figures have been rounded off to the nearest indicated unit in this report.

30

9. Risk Factors An investment in our units involves significant risks. The principal risks with respect to investment in Hulic Reit, Inc. are as follows.

Property and Business Risks

We have a limited operating history.

The Asset Manager has limited experience in operating a J-REIT.

Any adverse conditions in the Japanese economy could adversely affect us.

We may not be able to acquire properties to execute our growth and investment strategy in a manner that is accretive to earnings.

We may not be able to close future acquisitions of properties after they are announced.

Illiquidity in the real estate market may limit our ability to grow or adjust our portfolio.

The past experience of Hulic Co., Ltd. in the Japanese real estate market is not an indicator or guarantee of our future results.

Our reliance on Hulic Co., Ltd. and other Hulic Group companies could have a material adverse effect on our business.

We may not be able to successfully acquire the properties for which Hulic Co., Ltd. has granted us preferential negotiation rights, particularly where other private REITs have preferential negotiation rights for the same properties that may be superior to the rights granted to us.

There are potential conflicts of interest between us and certain Hulic Group companies, including the Asset Manager.

We may decide to acquire our own units on the market but there can be no assurance that we will successfully acquire such units to the extent planned or at all or be able to cancel or dispose of any such units in a manner beneficial to us.

We face significant competition in seeking tenants and it may be difficult to find replacement tenants.

Increases in prevailing market interest rates may increase our interest expense and may result in a decline in the market price of our units.

We may suffer large losses if any of our properties incurs damage from a natural or man-made disaster.

Most of the properties in our portfolio are concentrated in Tokyo and the surrounding areas.

Investments in next generation assets (private nursing homes, network centers and hotels) expose us to risks that are not associated with other real estate classes.

The recent addition of hotels as an investment target exposes us to new risks associated with the hotel industry, such as revenue volatility and potentially high capital expenditure and maintenance requirements.

Any inability to obtain financing for future acquisitions could adversely affect the growth of our portfolio.

Liquidity and other limitations on our activities under debt financing arrangements may adversely affect our business, financial condition and results of operations.

A high LTV ratio may increase our exposure to changes in interest rates and have a material adverse effect on our results of operations.

We may suffer impairment losses relating to our properties.

Decreases in tenant leasehold deposits and/or security deposits may increase our funding costs.

31

Our lack of control over operating costs may adversely affect our business.

We may lose rental revenues in the event of lease terminations, decreased lease renewals, or the default of a tenant as a result of financial difficulty or insolvency, and are exposed to the risk of careless or imprudent management of properties by tenants.

Master lease agreements expose us to the risk of becoming an unsecured creditor of Hulic Co., Ltd. as our master lessee in the event of its insolvency.

Our cost of complying with regulations applicable to our properties could adversely affect the results of our operations.

Any property defect may adversely affect our financial condition and results of operations.

We rely on expert appraisals and engineering, environmental and seismic reports, which are subject to significant uncertainties.

We rely on industry and market data that are subject to significant uncertainties.

Our buildings may violate earthquake resistance or other building codes, and any such buildings may collapse in even minor earthquakes or may be required to be strengthened or demolished by us at significant expense.

The environmental assessments of our properties made prior to our ownership may not uncover all environmental liabilities, and Japanese laws subject property owners to strict environmental liabilities.

Entering into forward commitment contracts or contracts to purchase properties under development may expose us to contractual penalties and market risks.

We may be exposed to regulatory and financial risks related to climate change.

Our success depends on the performance of service providers to which we are required to assign various key functions.

Our performance depends on the efforts of key personnel of the Asset Manager.

J-REITs and their asset managers are subject to tight supervision by the regulatory authorities.

Taxation Risks

Our failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would disqualify us from certain taxation benefits and significantly reduce our cash distributions to our unitholders.

If the Japanese tax authorities disagree with our interpretations of the Japanese tax laws and regulations for prior periods, we may be forced to pay additional taxes for those periods.

We may not be able to benefit from reductions in certain real estate taxes enjoyed by qualified J-REITs.

Changes in Japanese tax laws may significantly increase our tax burden.

We expect to be treated as a “passive foreign investment company” for U.S. federal income tax purposes.

Unitholders may be subject to U.S. Foreign Account Tax Compliance Act (FATCA) withholding tax after 2016.

Legal and Regulatory Risks

Any failure by the officers and employees of the Asset Manager to comply with insider trading regulations may damage our reputation and harm the interest of our unitholders.

Our ownership rights in some of our properties may be declared invalid or limited.

We may lose our rights in a property if the purchase of the property is recharacterized as a secured

32

financing.

Our leasehold or subleasehold rights may be terminated or may not be asserted against a third party in some cases.

Our properties for which third parties hold leasehold interests in the land but own the buildings thereupon may subject us to various risks.

We lease certain properties from third parties and sublease such properties to one or more tenants, which subjects us to various risks relating to these lease arrangements.

We co-lease parts of our properties with third parties to one or more tenants, which subjects us to various risks relating to these co-lease arrangements.

Some of our properties are held in the form of partial ownership (kubun shoyū), and our rights relating to such properties may be affected by the intentions of other owners.

Some of our properties are held in the form of a property or trust co-ownership interest, and our rights relating to such properties may be affected by the intentions of other owners.

We may hold interests in some properties through preferred shares of special purpose companies (tokutei mokuteki kaisha) in the future, and illiquidity in the market for such shares may limit our ability to sell our interest, and our rights relating to the properties held by such special purpose companies may be limited.

Some of our properties are subject to preferential negotiation rights of others.

We may hold interests in some properties through Japanese anonymous association (tokumei kumiai) agreements, and our rights relating to such properties may be limited.

We own all of our properties through trust beneficiary interests and may suffer losses as a trust beneficiary.

There are important differences regarding the rights of unitholders in a J-REIT compared to those of shareholders in a corporation.

The AIFMD may negatively affect our ability to market our units in the EEA and increase our compliance costs associated with the marketing of our units in the EEA.

Our units may be deemed to constitute “plan assets” for ERISA purposes, which may lead to the rescission of certain of our transactions, tax or fiduciary liability and our being held in violation of ERISA requirements.

33

III. Financial Statements (1) Balance Sheets

(Unit: thousands of yen)

Reporting period (As of February 28, 2019)

Previous period (As of August 31, 2018)

Assets Current assets

Cash and deposits (Notes 4 and 13) 8,150,550 5,514,254 Cash and deposits in trust (Notes 4 and 13) 7,155,321 6,313,366 Operating accounts receivable 122,052 30,498 Prepaid expenses 46,012 28,891 Consumption taxes receivable 87,107 – Other 20 3,769 Total current assets 15,561,065 11,890,780

Noncurrent assets Property, plant and equipment (Note 5)

Buildings 665,351 – Accumulated depreciation (6,652) – Buildings, net 658,699 –

Land 589,293 – Buildings in trust 60,329,107 56,489,791

Accumulated depreciation (6,059,337) (5,148,991) Buildings in trust, net 54,269,770 51,340,799

Structures in trust 363,078 345,197 Accumulated depreciation (106,171) (92,946) Structures in trust, net 256,906 252,250

Machinery and equipment in trust 283,547 281,614 Accumulated depreciation (124,207) (106,886) Machinery and equipment in trust, net 159,339 174,727

Tools, furniture and fixtures in trust 43,848 38,487 Accumulated depreciation (14,376) (11,144) Tools, furniture and fixtures in trust, net 29,472 27,342

Land in trust 235,498,952 210,875,873 Total property, plant and equipment 291,462,433 262,670,994

Intangible assets Leasehold rights 2,343,025 – Leasehold rights in trust 12,301,503 8,471,289 Other 140 1,058 Total intangible assets 14,644,670 8,472,348

Investments and other assets Lease and guarantee deposits 20,302 20,302 Long-term prepaid expenses 826,515 637,640 Deferred tax assets (Note 6) 21 13 Total investments and other assets 846,840 657,956

Total noncurrent assets 306,953,944 271,801,298 Deferred assets

Investment unit issuance costs 78,249 51,485 Investment corporation bond issuance costs 67,861 73,836 Total deferred assets 146,111 125,321

Total assets 322,661,121 283,817,401

35




Liabilities Current liabilities

Operating accounts payable 323,856 513,420 Short-term loans payable (Notes 7 and 13) 3,960,000 4,510,000 Current portion of investment corporation bonds (Notes 8 and 13) 2,000,000 –

Current portion of long-term loans payable (Notes 7 and 13) 10,320,000 13,130,000

Accounts payable - other 981,893 958,047 Accrued expenses 31,783 45,422 Income taxes payable 1,038 882 Accrued consumption taxes 32,588 115,115 Advances received 1,489,731 1,362,839 Deposits received 2,554 26,596 Total current liabilities 19,143,447 20,662,322

Noncurrent liabilities Investment corporation bonds (Notes 8 and 13) 10,000,000 12,000,000 Long-term loans payable (Notes 7 and 13) 113,230,000 93,760,000 Tenant leasehold and security deposits 140,823 – Tenant leasehold and security deposits in trust 12,944,264 11,633,323 Total noncurrent liabilities 136,315,088 117,393,323

Total liabilities 155,458,535 138,055,645 Net assets (Note 9)

Unitholders’ equity (Note 10) Unitholders’ capital 162,803,382 141,717,678 Surplus

Unappropriated retained earnings (Note 11) 4,399,204 4,044,077 Total surplus 4,399,204 4,044,077

Total unitholders’ equity 167,202,586 145,761,755 Total net assets (Note 9) 167,202,586 145,761,755

Total liabilities and net assets 322,661,121 283,817,401

See accompanying notes to financial statements.

36

(2) Statements of Income and Retained Earnings (Unit: thousands of yen)

Reporting period

(From September 1, 2018 to February 28, 2019)

Previous period (From March 1, 2018 to August 31, 2018)

Operating revenues Lease business revenue (Note 12) 8,310,374 7,357,004 Other lease business revenues (Note 12) 439,729 355,529 Gain on sales of real estate properties (Note 12) 194,302 389,340 Total operating revenues 8,944,406 8,101,873

Operating expenses Expenses related to rent business (Note 12) 2,924,653 2,519,504 Asset management fee 836,463 812,586 Asset custody fee 13,470 13,260 Administrative service fees 42,715 42,467 Directors’ compensations 6,000 6,000 Other operating expenses 125,202 131,359 Total operating expenses 3,948,504 3,525,179

Operating profit 4,995,901 4,576,694 Non-operating income

Interest income 59 47 Gain on forfeiture of unclaimed dividends 294 594 Compensation income for damages 12,181 – Total non-operating income 12,535 642

Non-operating expenses Interest expenses 409,237 395,093 Interest expenses on investment corporation bonds 39,275 12,521 Borrowing related expenses 122,386 97,685 Amortization of investment unit issuance costs 31,666 23,550 Amortization of investment corporation bond issuance costs 5,974 3,838

Total non-operating expenses 608,540 532,688 Ordinary profit 4,399,896 4,044,648 Profit before income taxes 4,399,896 4,044,648 Income taxes - current (Note 6) 1,047 889 Income taxes - deferred (Note 6) (7) 6 Total income taxes 1,039 895 Profit (Note 18) 4,398,857 4,043,752 Retained earnings brought forward 347 324 Unappropriated retained earnings 4,399,204 4,044,077


37

(3) Statements of Changes in Net Assets Reporting period (From September 1, 2018 to February 28, 2019)


Unitholders’ equity (Note 10)

Total net assets

Unitholders’ capital

Surplus Total

unitholders’ equity

Unappropriated retained earnings

Total surplus

Balance at the beginning of the period 141,717,678 4,044,077 4,044,077 145,761,755 145,761,755

Changes of items during the period

Issuance of new investment units 21,085,704 – – 21,085,704 21,085,704

Dividends of surplus – (4,043,730) (4,043,730) (4,043,730) (4,043,730)

Profit – 4,398,857 4,398,857 4,398,857 4,398,857

Total changes of items during the period 21,085,704 355,127 355,127 21,440,831 21,440,831

Balance at the end of the period 162,803,382 4,399,204 4,399,204 167,202,586 167,202,586



Unitholders’ equity (Note 10)

Total net assets

Unitholders’ capital

Surplus Total

unitholders’ equity

Unappropriated retained earnings

Total surplus

Balance at the beginning of the period 141,717,678 4,214,994 4,214,994 145,932,672 145,932,672

Changes of items during the period

Dividends of surplus – (4,214,670) (4,214,670) (4,214,670) (4,214,670)

Profit – 4,043,752 4,043,752 4,043,752 4,043,752

Total changes of items during the period – (170,917) (170,917) (170,917) (170,917)

Balance at the end of the period 141,717,678 4,044,077 4,044,077 145,761,755 145,761,755


38

(4) Statements of Cash Flows (Unit: thousands of yen)

Reporting period



Cash flows from operating activities Profit before income taxes 4,399,896 4,044,648 Depreciation and amortization 951,693 855,758 Amortization of investment unit issuance costs 31,666 23,550 Amortization of investment corporation bond issuance costs 5,974 3,838

Interest income (59) (47) Interest expenses 448,512 407,614 Decrease (increase) in operating accounts receivable (91,554) (20,281) Decrease (increase) in consumption taxes refund receivable (87,107) –

Decrease (increase) in prepaid expenses (17,121) (2,019) Increase (decrease) in operating accounts payable (145,213) 280,908 Increase (decrease) in accounts payable - other 23,837 (40,431) Increase (decrease) in accrued consumption taxes (82,527) 5,554 Increase (decrease) in advances received 126,892 115,526 Increase (decrease) in deposits received (24,042) 26,596 Decrease (increase) in long-term prepaid expenses (188,875) 81,489 Decrease in property, plant and equipment in trust due to sales 1,764,899 3,529,799

Other, net 1,719 (2,645) Subtotal 7,118,592 9,309,859 Interest income received 59 47 Interest expenses paid (460,425) (406,133) Income taxes (paid) refund (882) (1,009) Net cash provided by (used in) operating activities 6,657,344 8,902,764

Cash flows from investing activities Purchase of property, plant and equipment (1,254,385) – Purchase of property, plant and equipment in trust (30,297,080) (19,142,774) Purchase of intangible assets (2,343,025) – Purchase of intangible assets in trust (3,830,214) – Proceeds from collection of lease and guarantee deposits – 37 Repayments of tenant leasehold and security deposits (410) –

Proceeds from tenant leasehold and security deposits 141,233 – Repayments of tenant leasehold and security deposits in trust (109,457) (178,279) Proceeds from tenant leasehold and security deposits in trust 1,420,399 798,433

Net cash provided by (used in) investing activities (36,272,940) (18,522,582) Cash flows from financing activities

Proceeds from short-term loans payable 30,470,000 11,510,000 Repayments of short-term loans payable (31,020,000) (10,960,000) Proceeds from long-term loans payable 25,210,000 – Repayments of long-term loans payable (8,550,000) – Proceeds from issuance of investment corporation bonds – 6,955,379

Proceeds from issuance of investment units 21,027,273 – Dividends paid (4,043,427) (4,213,953) Net cash provided by (used in) financing activities 33,093,846 3,291,425

Net increase (decrease) in cash and cash equivalents 3,478,250 (6,328,392) Cash and cash equivalents at beginning of period 11,827,621 18,156,013 Cash and cash equivalents at end of period (Note 4) 15,305,871 11,827,621


39

(5) Notes to Financial Statements For the periods from September 1, 2018 to February 28, 2019 and from March 1, 2018 to August 31, 2018

1. Organization

Hulic Reit, Inc. (“the Investment Corporation”) was incorporated by Hulic REIT Management Co., Ltd. (the Investment Corporation’s Asset Manager) on November 7, 2013 with ¥200 million in capital (2,000 units), and registration was approved based on Article 187 of the Act on Investment Trusts and Investment Corporations of Japan (the “Investment Trust Act”) on November 25, 2013 (Registration No. 88 filed with the Director-General of the Kanto Local Finance Bureau). Subsequently, the Investment Corporation issued new investment units through a public offering (617,500 units) on February 6, 2014. Those units were listed on the Real Estate Investment Trust Section of the Tokyo Stock Exchange on February 7, 2014 (Securities Code: 3295). On March 7, 2014, the Investment Corporation further issued new investment units through an allocation to a third-party. Following the issuances of new investment units during the reporting period through the Investment Corporation’s fifth public offering (134,200 units) after its listing and through the allocation to a third-party (6,800 units), the total number of investment units outstanding was 1,251,000 units as of February 28, 2019.

The Investment Corporation’s real estate portfolio as of February 28, 2019 was comprised of 50 properties under management with a total leasable floor area of 288,230.96 m2. The Investment Corporation has already invested ¥306,929 million (based on acquisition price) into this portfolio. The occupancy rate as of February 28, 2019 was 100.00%.

2. Basis of Presentation

The financial statements of the Investment Corporation have been prepared in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), including provisions set forth in the Financial Instruments and Exchange Act of Japan, the Investment Trust Act, the Companies Act of Japan and related regulations, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The accompanying financial statements are basically a translation of the financial statements of the Investment Corporation, which were prepared in accordance with Japanese GAAP and were presented in the Securities Report of the Investment Corporation filed with the Kanto Local Finance Bureau of the Ministry of Finance. In preparing the accompanying financial statements, certain reclassifications have been made to the financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan. Amounts less than one thousand yen have been rounded down. As a result, the totals shown in the financial statements and notes thereto do not necessarily agree with the sum of the individual amounts. The Investment Corporation does not prepare consolidated financial statements, as the Investment Corporation has no subsidiaries.

3. Summary of Significant Accounting Policies

(1) Property, plant and equipment (including assets in trust) and depreciation

Property, plant and equipment are stated at cost, which includes the purchase price and related costs for acquisition, less accumulated depreciation. Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives of the assets ranging as stated below:

Buildings 3 to 64 years

Structures 4 to 20 years

Machinery and equipment 3 to 10 years

Tools, furniture and fixtures 3 to 15 years

(2) Intangible assets

Intangible assets are amortized on a straight-line basis over the estimated useful lives. Software for internal use is amortized over the estimated useful life of five years.

40

(3) Long-term prepaid expenses

Long-term prepaid expenses are amortized on a straight-line basis over the estimated useful lives.

(4) Investment corporation bond issuance costs

Investment corporation bond issuance costs are amortized on a straight-line basis over the redemption period.

(5) Investment unit issuance costs

Investment unit issuance costs are amortized on a straight-line basis over three years.

(6) Accounting for property taxes

For property tax, city planning tax and depreciable asset tax, the Investment Corporation charges the amount of property taxes assessed and determined applicable to the current period to expenses related to rent business.

Registered owners of properties in Japan as of January 1 are responsible for paying property taxes for the calendar year based on assessments by local governments. Therefore, registered owners who sold properties to the Investment Corporation were liable for property taxes for the calendar year, including the period from the date of the acquisition by the Investment Corporation until the end of the year. The Investment Corporation reimbursed sellers of properties for the equivalent amount of property taxes and included the amount in the acquisition cost of real estate. The amounts equivalent to property taxes included in the cost of acquisition of real estate are ¥20,489 thousand and ¥75,917 thousand for the periods from September 1, 2018 to February 28, 2019 and from March 1, 2018 to August 31, 2018, respectively.

(7) Hedge accounting method

(a) Hedge accounting method

Deferred hedge accounting is adopted for interest rate swap transactions. However, special treatment is adopted for interest rate swaps when the requirements for special treatment are fulfilled.

(b) Hedging instruments and hedged items

Hedging instruments: Interest rate swap transactions

Hedged items: Interest payments on borrowings

(c) Hedging policy

The Investment Corporation conducts derivative transactions to hedge risks as stipulated in the Investment Corporation’s Articles of Incorporation in accordance with the Investment Corporation’s risk management policy.

(d) Method for assessing the effectiveness of hedging

An assessment of the effectiveness of hedging is omitted for interest rate swaps because they fulfill the requirements for special treatment.

(8) Cash and cash equivalents

Cash and cash equivalents in the statement of cash flows consist of cash on hand and cash in trust; deposits and deposits in trust that can be withdrawn at any time; and short-term investments with a maturity of three months or less from the date of acquisition, which are readily convertible to cash and bear only an insignificant risk of price fluctuation.

(9) Accounting for beneficiary rights of real estate in trust

For beneficiary rights of real estate in trust owned by the Investment Corporation, all accounts of assets and liabilities within the assets in trust as well as all accounts of revenues generated and expenses incurred from

41

the assets in trust are recognized in the relevant accounts of the balance sheet and the statement of income and retained earnings.

The following material items of the assets in trust recognized in the relevant accounts are separately listed on the balance sheet.

(a) Cash and deposits in trust

(b) Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furniture and fixtures in trust and Land in trust

(c) Leasehold rights in trust

(d) Tenant leasehold and security deposits in trust

(10) Consumption taxes

Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes related to the acquisition of assets are treated as the cost of applicable assets.

(11) Accounting standards issued but not yet adopted

- Accounting Standard for Revenue Recognition (Accounting Standards Board Japan (“ASBJ”) Statement No. 29, issued on March 30, 2018)

- Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, issued on March 30, 2018)

(i) Overview

The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) have jointly developed a comprehensive accounting standard for revenue recognition and issued it as converged guidance on recognizing revenue in contracts with customers in May 2014 as IFRS 15 (IASB) and Topic606 (FASB), respectively. To respond to both IFRS 15 and Topic606 effective from the fiscal years beginning on or after January 1, 2018 and December 15, 2017, respectively, ASBJ has developed a comprehensive accounting standard for revenue recognition and issued it with the respective implementation guidance.

In developing the accounting standard for revenue recognition, ASBJ basically integrated the core principle of IFRS 15 from a comparability point of view of the financial statements, which is one of the benefits of ensuring consistency with IFRS 15. ASBJ, on the other side, considered additional alternative treatments where current practices under Japanese GAAP are to be reflected as far as such treatments would not significantly impair international comparability.

(ii) Effective date

The above standards are scheduled to be applied from the beginning of the fiscal year ending February 28, 2022.

(iii) Effects of application of the standards

The effects of the application of the above standard and guidance on the financial statements are currently being assessed.

(12) Change in presentation

- Application of “Partial Amendments to Accounting Standard for Tax Effect Accounting”

The “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018) have been applied from the beginning of the reporting period. Accordingly, deferred tax assets are presented under investments and other assets, and deferred tax liabilities are presented under noncurrent liabilities.

As a result of this change, ¥13 thousand of “Deferred tax assets” under “Current assets” has been reclassified as “Deferred tax assets” under “Investments and other assets” in the previous period’s presentation.

42

4. Cash and Cash Equivalents

Cash and cash equivalents as of February 28, 2019 and August 31, 2018 consist of the following balance sheet items:

(Unit: thousands of yen) Reporting period Previous period (As of February 28, 2019) (As of August 31, 2018)

Cash and deposits ¥ 8,150,550 ¥ 5,514,254 Cash and deposits in trust 7,155,321 6,313,366 Total cash and cash equivalents ¥ 15,305,871 ¥ 11,827,621

5. Property, Plant and Equipment and Intangible Assets The following table shows the summary of property, plant and equipment and intangible assets as of February 28, 2019:


Type of asset Balance at the beginning of

the period

Amount of increase

during the period

Amount of decrease

during the period

Balance at the end of the

period

Accumulated depreciation /Accumulated amortization Net balance at

the end of the period

Remarks

Depreciation

and amortization

Prop

erty

, pla

nt a

nd e

quip

men

t

Real

esta

te Buildings ¥ – ¥ 665,351 ¥ – ¥ 665,351 ¥ 6,652 ¥ 6,652 ¥ 658,699 Acquisition

of property

Land – 589,293 – 589,293 – – 589,293 Acquisition of property

Subtotal ¥ – ¥ 1,254,645 ¥ – ¥ 1,254,645 ¥ 6,652 ¥ 6,652 ¥ 1,247,992

Trus

t ben

efic

iary

righ

t

Buildings in trust ¥ 56,489,791 ¥ 3,839,315 ¥ – ¥ 60,329,107 ¥ 6,059,337 ¥ 910,345 ¥ 54,269,770 Acquisition of property

Structures in trust 345,197 17,881 – 363,078 106,171 13,225 256,906

Machinery and equipment in trust 281,614 1,933 – 283,547 124,207 17,320 159,339

Tools, furniture and fixtures in trust

38,487 5,361 – 43,848 14,376 3,231 29,472

Land in trust 210,875,873 26,387,979 1,764,899 235,498,952 – – 235,498,952 Acquisition and transfer of property

Subtotal ¥ 268,030,963 ¥ 30,252,469 ¥ 1,764,899 ¥ 296,518,533 ¥ 6,304,092 ¥ 944,123 ¥ 290,214,440

Total ¥ 268,030,963 ¥ 31,507,115 ¥ 1,764,899 ¥ 297,773,178 ¥ 6,310,744 ¥ 950,775 ¥ 291,462,433

Inta

ngib

le a

sset

s Leasehold rights ¥ – ¥ 2,343,025 ¥ – ¥ 2,343,025 ¥ – ¥ – ¥ 2,343,025 Acquisition of property

Leasehold rights in trust 8,471,289 3,830,214 – 12,301,503 – – 12,301,503 Acquisition

of property

Other 10,186 – – 10,186 10,046 918 140

Total ¥ 8,481,476 ¥ 6,173,240 ¥ – ¥ 14,654,716 ¥ 10,046 ¥ 918 ¥ 14,644,670

(Note 1) The amount of increase during the period is mainly due to the acquisition of six properties, Hulic Kamiyacho Building (additional acquisition), Shinagawa Season Terrace, KSS Gotanda Building, Hulic Nihonbashi Honcho 1 Chome Building, Bancho House and Ebisu Minami Building.

(Note 2) The amount of decrease during the period is due to transfers of the remaining part of the quasi co-ownership interest of Leaf Minatomirai (Land).

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6. Income Taxes

(1) Significant components of deferred tax assets and deferred tax liabilities (Deferred tax assets) (Unit: thousands of yen)



Enterprise tax payable ¥ 21 ¥ 13 Total deferred tax assets 21 13 Net deferred tax assets ¥ 21 ¥ 13

(2) Reconciliation of significant differences between the statutory tax rate and the effective tax rate



Statutory tax rate 31.51% 31.74% (Adjustments) Deductible cash distribution (31.50)% (31.73)% Others 0.01% 0.01% Effective tax rate 0.02% 0.02%

7. Short-term Loans Payable and Long-term Loans Payable

Summary information regarding short-term loans payable and long-term loans payable as of February 28, 2019 is as follows:

Classifi- cation Lender

Balance at the beginning of the period (millions of

yen)

Amount of increase

during the period (millions of yen)

Amount of decrease


Balance at the end

of the period (millions of

yen)

Average interest rate

(%) (Note 1) (Note 2)

Repayment date Use Remarks

Shor

t-ter

m lo

ans p

ayab

le

Mizuho Bank, Ltd. ¥ 275 ¥ – ¥ 275 ¥ –

0.3135 June 28, 2019

(Note 3) Unsecured

and unguaranteed

Sumitomo Mitsui Banking Corporation 192 – 192 –

MUFG Bank, Ltd. 82 – 82 – Mizuho Bank, Ltd. 1,980 – – 1,980

0.2626 August 8, 2019

Sumitomo Mitsui Banking Corporation 1,386 – – 1,386

MUFG Bank, Ltd. 594 – – 594

Mizuho Bank, Ltd. – 18,500 18,500 – 0.3136 August 30, 2019

Mizuho Bank, Ltd. – 2,420 2,420 – 0.3127 August 30, 2019

Mizuho Bank, Ltd. – 3,050 3,050 –

0.3136 September 9, 2019

Sumitomo Mitsui Banking Corporation – 2,135 2,135 –

MUFG Bank, Ltd. – 915 915 – Sumitomo Mitsui Trust Bank, Limited – 3,450 3,450 – 0.3135 October 1,

2019 Subtotal ¥ 4,510 ¥ 30,470 ¥ 31,020 ¥ 3,960

Long

-term

loan

s pay

able

Mizuho Bank, Ltd. ¥ 2,570 ¥ – ¥ 2,570 ¥ –

0.7738 February 7, 2019

(Note 3) Unsecured

and unguaranteed

Sumitomo Mitsui Banking Corporation 1,950 – 1,950 –

MUFG Bank, Ltd. 1,100 – 1,100 – Mizuho Trust & Banking Co., Ltd. 1,050 – 1,050 –

The Norinchukin Bank 1,660 – 1,660 – Resona Bank, Limited 220 – 220 – Mizuho Bank, Ltd. 1,000 – – 1,000

0.4350 August 30, 2019

Sumitomo Mitsui Banking Corporation 960 – – 960


44



yen)

Amount of increase


Amount of decrease


Balance at the end


yen)


(%) (Note 1) (Note 2)


Long

-term

loan

s pay

able

Mizuho Trust & Banking Co., Ltd. 300 – – 300

0.4350 August 30, 2019

(Note 3) Unsecured

and unguaranteed

Sumitomo Mitsui Trust Bank, Limited 500 – – 500

The Norinchukin Bank 500 – – 500 Resona Bank, Limited 170 – – 170 Shinkin Central Bank 200 – – 200 Aozora Bank, Ltd. 200 – – 200 Shinsei Bank, Limited 200 – – 200 Mizuho Bank, Ltd. 1,650 – – 1,650

0.4845 February 28, 2020


MUFG Bank, Ltd. 700 – – 700 Mizuho Trust & Banking Co., Ltd. 660 – – 660

The Norinchukin Bank 1,400 – – 1,400 Resona Bank, Limited 140 – – 140 Shinkin Central Bank 300 – – 300 Sumitomo Mitsui Banking Corporation 2,000 – – 2,000 0.4810 August 31,

2020 Mizuho Bank, Ltd. 1,000 – – 1,000

0.1700 August 31, 2020 MUFG Bank, Ltd. 150 – – 150

The Norinchukin Bank 409 – – 409 Mizuho Bank, Ltd. 2,560 – – 2,560

1.1713 February 7, 2021


MUFG Bank, Ltd. 1,060 – – 1,060 Mizuho Trust & Banking Co., Ltd. 1,050 – – 1,050

Sumitomo Mitsui Trust Bank, Limited 1,660 – – 1,660

Resona Bank, Limited 270 – – 270 Mizuho Bank, Ltd. 2,800 – – 2,800

0.6750 August 31, 2021



Aozora Bank, Ltd. 300 – – 300 Shinsei Bank, Limited 300 – – 300 Mizuho Bank, Ltd. 2,385 – – 2,385

0.7730 February 28, 2022


MUFG Bank, Ltd. 1,055 – – 1,055 Mizuho Trust & Banking Co., Ltd. 800 – – 800

Sumitomo Mitsui Trust Bank, Limited 1,400 – – 1,400

Resona Bank, Limited 200 – – 200 Mizuho Bank, Ltd. 150 – – 150

0.4173 February 28, 2022




The Norinchukin Bank 500 – – 500

45



yen)

Amount of increase


Amount of decrease


Balance at the end


yen)


(%) (Note 1) (Note 2)


Long

-term

loan

s pay

able

Development Bank of Japan Inc. 2,450 – – 2,450 1.6100 August 7,

2022

(Note 3) Unsecured

and unguaranteed

Mizuho Bank, Ltd. 1,144 – – 1,144

0.7488 August 31, 2022



0.7488 August 31, 2022 The Norinchukin Bank 414 – – 414

Resona Bank, Limited 125 – – 125 Development Bank of Japan Inc. 414 – – 414 0.7550 August 31,

2022 Mizuho Bank, Ltd. 650 – – 650

0.5538 August 31, 2022




The Norinchukin Bank 445 – – 445 Resona Bank, Limited 150 – – 150 Mizuho Bank, Ltd. 1,350 – – 1,350

0.4099 February 28, 2023




The Norinchukin Bank 400 – – 400 Resona Bank, Limited 243 – – 243 Shinkin Central Bank 141 – – 141 Aozora Bank, Ltd. 141 – – 141 Mizuho Bank, Ltd. 1,500 – – 1,500

0.6031 February 28, 2023




The Norinchukin Bank 245 – – 245 Resona Bank, Limited 150 – – 150 Sompo Japan Nipponkoa Insurance Inc.

– 500 – 500 0.4100 February 28,

2023 Mitsui Sumitomo Insurance Company, Limited

– 500 – 500

Mizuho Bank, Ltd. 1,377 – – 1,377

0.4620 August 31, 2023




Shinsei Bank, Limited 141 – – 141 Mizuho Bank, Ltd. 1,863 – – 1,863

0.6564 August 31, 2023 Sumitomo Mitsui Banking

Corporation 1,411 – – 1,411

46



yen)

Amount of increase


Amount of decrease


Balance at the end


yen)


(%) (Note 1) (Note 2)


Long

-term

loan

s pay

able


0.6564 August 31, 2023

(Note 3) Unsecured

and unguaranteed



The Norinchukin Bank 500 – – 500 Resona Bank, Limited 302 – – 302 Mizuho Bank, Ltd. 400 – – 400

1.8188 February 7, 2024 Sumitomo Mitsui Banking

Corporation 300 – – 300

MUFG Bank, Ltd. 300 – – 300 1.8188 February 7, 2024

Development Bank of Japan Inc. 809 – – 809

0.5188 February 29, 2024 Nippon Life Insurance

Company 500 – – 500

Mizuho Bank, Ltd. 1,000 – – 1,000

0.6485 February 29, 2024


MUFG Bank, Ltd. 1,719 – – 1,719 Mizuho Trust & Banking Co., Ltd. 600 – – 600


The Norinchukin Bank 569 – – 569 Nippon Life Insurance Company – 500 – 500 0.4600 February 29,

2024 Development Bank of Japan Inc. 1,900 – – 1,900 1.1738 August 30,

2024 Meiji Yasuda Life Insurance Company 500 – – 500 0.5932 August 30,

2024

Mizuho Bank, Ltd. 1,754 – – 1,754 0.7800 August 30, 2024

Mizuho Bank, Ltd. 1,400 – – 1,400

0.5913 August 30, 2024




The Norinchukin Bank 520 – – 520 Resona Bank, Limited 215 – – 215 Shinkin Central Bank 140 – – 140 Shinsei Bank, Limited 140 – – 140 Mizuho Bank, Ltd. 250 – – 250

1.4600 February 28, 2025


MUFG Bank, Ltd. 125 – – 125 Mizuho Bank, Ltd. 250 – – 250

0.7275 February 28, 2025


MUFG Bank, Ltd. 125 – – 125 Development Bank of Japan Inc. 969 – – 969 0.8500 February 28,

2025 Mizuho Bank, Ltd. 1,725 – – 1,725

0.6574 February 28, 2025



47



yen)

Amount of increase


Amount of decrease


Balance at the end


yen)


(%) (Note 1) (Note 2)


Long

-term

loan

s pay

able

Development Bank of Japan Inc. 1,010 – – 1,010

0.6574 February 28, 2025

(Note 3) Unsecured

and unguaranteed


The Norinchukin Bank 400 – – 400 Resona Bank, Limited 215 – – 215 Shinkin Central Bank 140 – – 140 Shinsei Bank, Limited 140 – – 140 Mizuho Bank, Ltd. – 200 – 200

0.4133 February 28, 2025

Mizuho Trust & Banking Co., Ltd. – 200 – 200

Sumitomo Mitsui Trust Bank, Limited – 200 – 200

The Norinchukin Bank – 450 – 450 Resona Bank, Limited – 140 – 140 Shinsei Bank, Limited – 150 – 150 Mizuho Bank, Ltd. 1,531 – – 1,531

0.7246 August 29, 2025 Sumitomo Mitsui Banking

Corporation 1,267 – – 1,267


0.7246 August 29, 2025


Development Bank of Japan Inc. 410 – – 410

Aozora Bank, Ltd. 280 – – 280 Meiji Yasuda Life Insurance Company 230 – – 230

Nippon Life Insurance Company 230 – – 230

Mizuho Bank, Ltd. – 500 – 500

0.5700 August 29, 2025

Development Bank of Japan Inc.

– 1,200 – 1,200

Aozora Bank, Ltd. – 600 – 600 Mizuho Bank, Ltd. – 2,910 – 2,910

0.4800 February 27, 2026

Sumitomo Mitsui Banking Corporation – 1,700 – 1,700

MUFG Bank, Ltd. – 850 – 850 Mizuho Trust & Banking Co., Ltd. – 1,100 – 1,100


The Norinchukin Bank – 1,410 – 1,410 Resona Bank, Limited – 880 – 880 Shinsei Bank, Limited – 450 – 450 Mizuho Bank, Ltd. – 3,420 – 3,420

0.5840 August 31, 2026

Sumitomo Mitsui Banking Corporation – 2,700 – 2,700

MUFG Bank, Ltd. – 1,600 – 1,600 Mizuho Trust & Banking Co., Ltd. – 1,050 – 1,050


The Norinchukin Bank – 1,000 – 1,000 Mizuho Bank, Ltd. 150 – – 150

1.7500 February 26, 2027


MUFG Bank, Ltd. 75 – – 75 Subtotal ¥ 106,890 ¥ 25,210 ¥ 8,550 ¥ 123,550

Total ¥ 111,400 ¥ 55,680 ¥ 39,570 ¥ 127,510

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(Note 1) The average interest rate shows the weighted average rate rounded to four decimal places. Moreover, for borrowings hedged using interest rate swaps to avoid interest rate fluctuation risks, a weighted average that accounts for the effect of the interest rate swap is shown.

(Note 2) Long-term loans payable are borrowings that carry fixed interest (including borrowings where the interest rate is fixed by using interest rate swaps).

(Note 3) The borrowings were funds to purchase trust beneficiary rights of real estate in trust (including ancillary expenses) and to repay borrowings, etc.

(Note 4) Repayment of long-term loans payable scheduled for each year within 5 years after the date of the balance sheet is as follows:


Due within 1 year Due after 1 year, but within 2 years

Due after 2 years, but within 3 years



Long-term loans payable ¥ 10,320,000 ¥ 12,109,000 ¥ 15,680,000 ¥ 18,705,000 ¥ 19,213,000

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8. Investment Corporation Bond

Summary information regarding investment corporation bonds as of February 28, 2019 is as follows:

Issue Issuance date Balance at the

beginning of the period (millions of yen)

Balance at the end of the period (millions of yen)

Interest rate (%)

Repayment date

Repayment method Use Collateral

1st Series Unsecured Investment Corporation

Bond

August 31, 2015 ¥ 2,000 ¥ 2,000 0.950 August 29,

2025 Lump-sum repayment

Repayment of borrowings

None (Note 1)

2nd Series Unsecured Investment Corporation

Bond




None (Note 1)

3rd Series Unsecured Investment Corporation

Bond




None (Note 1)

4th Series Unsecured Investment Corporation

Bond

August 30, 2018 7,000 7,000 0.770 August 30,



None (Note 1)

Total ¥ 12,000 ¥ 12,000

(Note 1) With limited inter-bond pari passu clause. (Note 2) Repayment of investment corporation bonds scheduled for each year within 5 years after the date of the balance sheet

is as follows: (Unit: thousands of yen)

Due within 1 year Due after 1 year, but within 2 years




Investment corporation bonds ¥ 2,000,000 ¥ – ¥ – ¥ – ¥ –

9. Net Assets

The Investment Corporation is required to maintain net assets of at least ¥50 million pursuant to the Investment Trust Act.

10. Unitholders’ Equity

Reporting period (From September 1, 2018



Total number of authorized investment units 20,000,000 units 20,000,000 units Number of investment units issued 1,251,000 units 1,110,000 units

11. Distributions

Pursuant to the distribution policy prescribed in Article 35, Paragraph 1 of the Investment Corporation’s Articles of Incorporation, the distribution amount shall be in excess of an amount equivalent to 90% of earnings available for distributions as defined in Article 67-15 of the Act on Special Measures Concerning Taxation, but not in excess of the amount of earnings. Based on this policy, the Investment Corporation has declared the total distributions to be ¥4,398,516,000, which is the largest integral multiple of the number of investment units issued and outstanding (1,251,000 units), and not in excess of unappropriated retained earnings.

In addition, the Investment Corporation shall not distribute cash in an amount in excess of earnings prescribed in Article 35, Paragraph 2 of the Investment Corporation’s Articles of Incorporation.

Reporting period (From September 1, 2018



I Unappropriated retained earnings ¥ 4,399,204,085 ¥ 4,044,077,027 II Distribution amount ¥ 4,398,516,000 ¥ 4,043,730,000 [Distributions per unit] [¥ 3,516] [¥ 3,643] III Retained earnings brought forward ¥ 688,085 ¥ 347,027

50

12. Breakdown of Property-related Revenues and Expenses

(1) Breakdown of property operating profit

(Unit: thousands of yen) Reporting period



A. Property operating revenues Lease business revenue Rent ¥ 7,335,483 ¥ 6,439,541 Land rent 270,787 329,972 Common area revenue 704,103 8,310,374 587,490 7,357,004 Other lease business revenues Utilities revenue 318,557 247,047 Other revenue 121,171 439,729 108,482 355,529 Total property operating revenues ¥ 8,750,103 ¥ 7,712,533 B. Property operating expenses

Expenses related to rent business Property management fees ¥ 516,294 ¥ 434,776 Utilities 322,354 271,492 Property and other taxes 597,517 603,159 Insurance premium 8,579 8,044 Maintenance and repairs 115,929 91,311 Depreciation 950,775 854,739 Other expenses related to rent business 413,201 2,924,653 255,981 2,519,504 Total property operating expenses ¥ 2,924,653 ¥ 2,519,504 C. Property operating profit (A – B) ¥ 5,825,449 ¥ 5,193,028

(2) Breakdown of gains on sales of real estate properties




Leaf Minatomirai (Land) (Note) Revenue from sales of real estate properties ¥ 1,965,000 ¥ 3,930,000 Cost of real estate properties sold 1,764,899 3,529,799 Other expenses related to sales of real estate properties 5,797 10,860 Gain on sales of real estate properties ¥ 194,302 ¥ 389,340

(Note) The quasi co-ownership interest of Leaf Minatomirai (Land) is 15.0% for the reporting period and 30.0% for the previous period.

(3) Transactions with major unitholders




From operating transactions Lease business revenue ¥ 849,781 ¥ 908,966 Gain on sales of real estate properties 194,302 389,340

13. Financial Instruments

(1) Overview

(i) Policy for financial instruments

The Investment Corporation procures essential funds for acquiring properties, repairs and repayment of debt mainly through loans from financial institutions, issuance of investment corporation bonds and issuance of

51

investment units and other means. In procuring interest-bearing debt, the Investment Corporation takes into account a balance between flexibility in procurement of funds and financial stability.

Furthermore, the Investment Corporation uses derivatives only for the purpose of hedging fluctuation risk of interest rates for borrowings and others and does not enter into derivative transactions for any speculative purposes.

(ii) Types of financial instruments, related risks, and risk management

Deposits are used for investment of the Investment Corporation’s surplus funds. As they are exposed to credit risk such as bankruptcy of the depository financial institutions, deposits are carried out with safety and redeemability taken into consideration and are limited to short-term deposits.

Borrowings and investment corporation bonds are conducted mainly for the purpose of acquiring properties and refinancing of existing borrowings. Of these borrowings, those with floating interest rates are exposed to interest rate fluctuation risk. To avoid this fluctuation risk, the Investment Corporation uses derivative transactions (interest rate swaps) as hedging instruments, which, in effect, converts fluctuating interest rates into fixed interest rates.

For the method of hedge accounting, hedging instruments and hedged items, hedging policy and the method of assessing hedge effectiveness, please refer to “(7) Hedge accounting method” in “3. Summary of Significant Accounting Policies” above.

(iii) Supplemental explanation of the fair value of financial instruments

The fair values of financial instruments are based on their market prices, if available. If there is no available market price for certain financial instruments, such fair value is based on the value reasonably estimated. Since variable factors are reflected in estimating the fair value, different assumptions could result in a different fair value. The contract amounts related to derivatives mentioned in “Derivative transactions” below do not represent the value of the market risk associated with the derivative transactions.

(2) Fair value of financial instruments

The carrying amounts on the balance sheet, fair values, and the differences between the two values as of February 28, 2019 and August 31, 2018 are as follows:




Carrying amount Fair value Difference Carrying

amount Fair value Difference

(i) Cash and deposits ¥ 8,150,550 ¥ 8,150,550 ¥ – ¥ 5,514,254 ¥ 5,514,254 ¥ – (ii) Cash and deposits in

trust 7,155,321 7,155,321 – 6,313,366 6,313,366 –

Total ¥ 15,305,871 ¥ 15,305,871 ¥ – ¥ 11,827,621 ¥11,827,621 ¥ – (i) Short-term loans payable ¥ 3,960,000 ¥ 3,960,000 ¥ – ¥ 4,510,000 ¥ 4,510,000 ¥ – (ii) Current portion of

investment corporation bond

2,000,000 1,996,800 (3,200)

– – –

(iii) Current portion of long-term loans payable 10,320,000 10,342,436 22,436 13,130,000 13,182,507 52,507

(iv) Investment corporation bond 10,000,000 10,040,700 40,700 12,000,000 12,019,500 19,500

(v) Long-term loans payable 113,230,000 111,690,715 (1,539,284) 93,760,000 92,746,758 (1,013,241) Total ¥ 139,510,000 ¥ 138,030,652 ¥ (1,479,347) ¥123,400,000 ¥122,458,766 ¥ (941,233)

Derivative transactions ¥ – ¥ – ¥ – ¥ – ¥ – ¥ –

52

(Note 1) Methods to determine the fair values of financial instruments and matters regarding derivative transactions Assets (i) Cash and deposits, and (ii) Cash and deposits in trust

As these are settled within a short period of time, the fair value is approximately the same as the carrying amount and is thus stated at that carrying amount.

Liabilities (i) Short-term loans payable

As these are settled within a short period of time with variable interest rates, the fair value is approximately the same as the carrying amount and is thus stated at that carrying amount.

(ii) Current portion of investment corporation bond, and (iv) Investment corporation bond The fair value is calculated based on reference indicative prices of sale/purchase transactions provided by financial institutions, etc.

(iii) Current portion of long-term loans payable, and (v) Long-term loans payable Since long-term loans payable that carry floating interest rates are reviewed on a short-term interval to reflect market interest rates, and the Investment Corporation’s credit standing did not change significantly after the execution of the loans, their fair value is considered approximate to the carrying amounts. Therefore, the carrying amounts are used as the fair value of these liabilities. (However, for long-term loans payable with floating interest rates to which special treatment for interest rate swaps is applied (Please refer to “Derivative transactions” below.), the fair value is calculated by discounting the sum of principal and interest, which are treated in combination with the said interest rate swap, at a reasonable rate estimated for a similar new loan that is made corresponding to the remaining period.) The fair value of long-term loans payable carrying fixed interest rates is calculated by discounting the sum of principal and interest at a reasonable rate estimated for a similar new loan that is made corresponding to the remaining period.

(Note 2) Redemption schedule for monetary claims as of February 28, 2019 and August 31, 2018


As of February 28, 2019

Due within 1 year

Due after 1 year, but

within 2 years

Due after 2 years, but

within 3 years


within 4 years


within 5 years

Due after 5 years

Cash and deposits ¥ 8,150,550 ¥ – ¥ – ¥ – ¥ – ¥ – Cash and deposits in trust 7,155,321 – – – – – Total ¥ 15,305,871 ¥ – ¥ – ¥ – ¥ – ¥ –


As of August 31, 2018

Due within 1 year


within 2 years


within 3 years


within 4 years


within 5 years

Due after 5 years

Cash and deposits ¥ 5,514,254 ¥ – ¥ – ¥ – ¥ – ¥ – Cash and deposits in trust 6,313,366 – – – – – Total ¥ 11,827,621 ¥ – ¥ – ¥ – ¥ – ¥ –

(Note 3) Redemption schedule for investment corporation bonds, long-term loans payable and other interest-bearing debt as

of February 28, 2019 and August 31, 2018 (Unit: thousands of yen)

As of February 28, 2019

Due within 1 year


within 2 years


within 3 years


within 4 years


within 5 years

Due after 5 years

Short-term loans payable ¥ 3,960,000 ¥ – ¥ – ¥ – ¥ – ¥ – Investment corporation bond 2,000,000 – – – – 10,000,000 Long-term loans payable 10,320,000 12,109,000 15,680,000 18,705,000 19,213,000 47,523,000 Total ¥ 16,280,000 ¥ 12,109,000 ¥ 15,680,000 ¥ 18,705,000 ¥ 19,213,000 ¥ 57,523,000



Due within 1 year


within 2 years


within 3 years


within 4 years


within 5 years

Due after 5 years

Short-term loans payable ¥ 4,510,000 ¥ – ¥ – ¥ – ¥ – ¥ – Investment corporation bond – 2,000,000 – – – 10,000,000 Long-term loans payable 13,130,000 9,299,000 15,680,000 17,610,000 18,615,000 32,556,000 Total ¥ 17,640,000 ¥ 11,299,000 ¥ 15,680,000 ¥ 17,610,000 ¥ 18,615,000 ¥ 42,556,000

53

14. Derivative Transactions

(1) Derivative transactions not applying hedge accounting

As of February 28, 2019 and August 31, 2018

Not applicable.

(2) Derivative transactions applying hedge accounting

The contracted amount or principal amount equivalent set forth in the contract as of February 28, 2019 and August 31, 2018 for each hedge accounting method is as follows:

(Unit: thousands of yen) As of February 28, 2019

Hedge accounting method Type of derivative transaction Major hedged

item

Contracted amount Fair value

Measurement method for fair value

Portion due after 1 year

Special treatment of interest rate swaps

Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans payable ¥ 72,057,000 ¥ 61,737,000 * –



Hedge accounting method Type of derivative transaction Major hedged

item

Contracted amount Fair value

Measurement method for fair value

Portion due after 1 year

Special treatment of interest rate swaps

Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans payable ¥ 61,647,000 ¥ 48,517,000 * –

* Interest rate swap transactions to which special treatment is applied are accounted for as an integral part of long-term loans payable, the hedged item. Thus, their fair values are included in the fair value of long-term loans payable. (Please refer to the preceding “13. Financial Instruments, (2) Fair value of financial instruments, (Note 1) Methods to determine the fair values of financial instruments and matters regarding derivative transactions, Liabilities (iii) Current portion of long-term loans payable, and (v) Long-term loans payable.”)

15. Leases

Operating lease transactions (Lessor)

Future minimum lease payments under noncancelable operating lease transactions (Unit: thousands of yen)



Due within 1 year ¥ 7,829,413 ¥ 6,452,898

Due after 1 year 40,258,602 24,702,862

Total ¥ 48,088,016 ¥ 31,155,761

54

16. Investment and Rental Properties

The Investment Corporation owns rental office buildings and other properties in Tokyo and other regions for rent revenue. The balance sheet carrying amounts, changes during the fiscal period under review, and fair values of these rental properties are as follows:




Carrying amount Balance at the beginning of the period ¥ 271,142,283 ¥ 256,385,407 Changes during period 34,964,680 14,756,875 Balance at the end of the period ¥ 306,106,963 ¥ 271,142,283

Fair value at the end of the period ¥ 355,242,000 ¥ 313,070,000 (Note 1) The balance sheet carrying amount is the acquisition cost less accumulated depreciation. (Note 2) The main reasons for increases in the investment and rental properties during the reporting period and the previous

period are the acquisition of real estate and beneficiary rights of real estate in trust of six properties (¥37,503,839 thousand) in the reporting period and beneficiary rights of real estate in trust of three properties (¥18,829,580 thousand) in the previous period. The decrease during the reporting period is mainly due to transfers of beneficiary rights of real estate in trust of one property and depreciation (¥1,764,899 thousand and ¥950,775 thousand, respectively). The decrease during the previous period is mainly due to transfers of beneficiary rights of real estate in trust of one property and depreciation (¥3,529,799 thousand and ¥854,739 thousand, respectively).

(Note 3) The fair value at the end of the period is the appraisal value provided by an independent real estate appraiser. The fair value at the end of the previous period includes that of “Leaf Minatomirai (Land),” which is stated at the transfer price stipulated on the trust beneficiary right sales agreement concluded on October 13, 2017. The profit or loss for the period under review concerning investment and rental properties is indicated under “12. Breakdown of Property-related Revenues and Expenses.”

17. Related-Party Transactions

(1) Parent company, major corporate unitholders and other

Reporting period (From September 1, 2018 to February 28, 2019)

Type Name Location

Capital stock or

investments in capital

(thousands of yen)

Business or occupation

Percentage of voting

rights held

Relationship

Nature of transaction

Amount of transaction

(thousands of yen)

Account item

Balance at the end of the period (thousands

of yen)

Inter- locking officers

Business relation-

ship

Major corporate unitholder

Hulic Co., Ltd.

Chuo-ku, Tokyo ¥62,718,573

Real estate business

(directly) 11.24% –

Rent and manage-ment of real estate

Purchase of beneficiary right of real estate in trust

¥ 29,770,000 – ¥ –

Transfer of beneficiary right of real estate in trust

¥ 1,965,000 – ¥ –

Keeping of leasehold and security deposits

¥ 1,200,374 Tenant leasehold and security deposits in trust

¥10,596,019 Repayment of leasehold and security deposits

¥ 109,451

Earning of rent revenue, etc.

¥ 849,781 Advances received

¥ 148,386

(Note 1) Transaction terms are determined based on current market prices. (Note 2) Consumption taxes are not included in amount of transaction but are included in balance at the end of the period.

55


Type Name Location

Capital stock or


(thousands of yen)



rights held

Relationship



(thousands of yen)

Account item


of yen)


Business relation-

ship

Major corporate unitholder

Hulic Co., Ltd.

Chuo-ku, Tokyo ¥62,718,573

Real estate business

(directly) 11.40% –

Rent and manage-ment of real estate

Purchase of beneficiary right of real estate in trust

¥ 18,556,000 – ¥ –

Transfer of beneficiary right of real estate in trust

¥ 3,930,000 – ¥ –

Keeping of leasehold and security deposits

¥ 788,715 Tenant leasehold and security deposits in trust

¥ 9,505,096 Repayment of leasehold and security deposits

¥ 178,279

Earning of rent revenue, etc.

¥ 908,966 Advances received ¥ 155,061


(2) Affiliated companies and other

Reporting period (From September 1, 2018 to February 28, 2019) and previous period (From March 1, 2018 to August 31, 2018)

Not applicable.

(3) Fellow subsidiary companies and other


Type Name Location

Capital stock or


(thousands of yen)



rights held

Relationship



(thousands of yen)

Account item


of yen)


Business relation-

ship

Companies whose majority of voting rights are owned by major (corporate) unitholder

Hulic Reit Manage-ment Co., Ltd.

Chuo-ku, Tokyo ¥ 200,000

Asset management for investment corporations

– 1

Consign-ment of asset management

Payment of asset management fees

¥ 952,950 Operating accounts payable

¥ 903,380

(Note 1) The asset management fees for the reporting period include management fees of ¥111,575 thousand relating to the acquisitions that are capitalized as part of the acquisition cost for the individual real property and ¥4,912 thousand relating to the transfer that are deducted from the gain on sales of the individual real properties.


56


Type Name Location

Capital stock or


(thousands of yen)



rights held

Relationship



(thousands of yen)

Account item


of yen)


Business relation-

ship

Companies whose majority of voting rights are owned by major (corporate) unitholder

Hulic Reit Manage-ment Co., Ltd.

Chuo-ku, Tokyo ¥ 200,000

Asset management for investment corporations

– 1

Consign-ment of asset management

Payment of asset management fees

¥ 868,839 Operating accounts payable

¥ 877,593

(Note 1) The asset management fees for the reporting period include management fees of ¥46,427 thousand relating to the acquisitions that are capitalized as part of the acquisition cost for the individual real property and ¥9,825 thousand relating to the transfer that are deducted from the gain on sales of the individual real properties.


(4) Directors, major individual unitholders and other

Reporting period (From September 1, 2018 to February 28, 2019) and previous period (From March 1, 2018 to August 31, 2018)

Transactions carried out by Eiji Tokita, Executive Officer of the Investment Corporation, as the Representative of a third party (Hulic Reit Management Co., Ltd.) are as shown above in transactions with Hulic Reit Management Co., Ltd. in “(3) Fellow subsidiary companies and other.”

18. Per Unit Information

(Unit: yen)

Reporting period



Net assets per unit ¥ 133,655 ¥ 131,316 Basic earnings per unit ¥ 3,654 ¥ 3,643

(Note 1) Basic earnings per unit is calculated by dividing profit by the daily weighted average number of investment units during the period. Fully diluted earnings per unit has not been stated as there are no potentially dilutive investment units.

(Note 2) The following is the basis for calculating basic earnings per unit:

Reporting period



Profit (thousands of yen) ¥ 4,398,857 ¥ 4,043,752 Amount not attributable to common unitholders (thousands of yen) ¥ – ¥ – Profit attributable to common investment units (thousands of yen) ¥ 4,398,857 ¥ 4,043,752 Average number of investment units during the period (units) 1,203,546 1,110,000

57

19. Segment and Related Information

[Segment information]

Disclosure is omitted as the Investment Corporation is comprised of a single reportable segment engaged in the real estate lease business.

[Related information]


(1) Information about each product and service

Disclosure is omitted as operating revenues from external customers within a single product/service category accounts for over 90% of operating revenues on the statement of income and retained earnings.

(2) Information about each geographical area

(i) Operating revenues

Disclosure is omitted as operating revenues from external customers in Japan exceeded 90% of operating revenues on the statement of income and retained earnings.

(ii) Property, plant and equipment

Disclosure is omitted as the amount of property, plant and equipment located in Japan exceeded 90% of property, plant and equipment on the balance sheet.

(3) Information about major customers (Unit: thousands of yen)

Name of tenant Operating revenues Related segment Hulic Co., Ltd. ¥ 1,044,084 Real estate lease business


(1) Information about each product and service

Disclosure is omitted as operating revenues from external customers within a single product/service category accounts for over 90% of operating revenues on the statement of income and retained earnings.

(2) Information about each geographical area

(i) Operating revenues

Disclosure is omitted as operating revenues from external customers in Japan exceeded 90% of operating revenues on the statement of income and retained earnings.

(ii) Property, plant and equipment

Disclosure is omitted as the amount of property, plant and equipment located in Japan exceeded 90% of property, plant and equipment on the balance sheet.

(3) Information about major customers (Unit: thousands of yen)

Name of tenant Operating revenues Related segment Hulic Co., Ltd. ¥ 1,298,306 Real estate lease business

58

20. Commitment Line Contracts

The Investment Corporation has commitment line contracts with banks and other financial institutions.




Total amount of commitment line contracts ¥10,000,000 ¥10,000,000

Borrowings outstanding – –

Remaining available amount ¥10,000,000 ¥10,000,000

21. Asset Retirement Obligations

Reporting period (As of February 28, 2019) and previous period (As of August 31, 2018)

Not applicable.

22. Subsequent Events

Not applicable.

59

hulic reit, inc....result, our portfolio at the end of the 10th fiscal period (as of february 28,...

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